GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

BOARD OF DIRECTORS’ REPORT AND FINANCIAL STATEMENTS

BOARD OF DIRECTORS’ REPORT AND FINANCIAL STATEMENTS 2019 1 2019 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

CONTENTS

Board of Directors’ Report for 2019...... 3 Solvency...... 28 Sampo plc’s Notes to the Accounts...... 171 Sampo Group...... 4 Debt Financing...... 29 Summary of Significant Account Policies...... 172 Economic Environment...... 6 Outlook ...... 31 Notes to the Income Statement 1–4...... 172 Business Areas ...... 7 Outlook for 2020...... 31 Notes to the Assets 5–9...... 173 If ...... 7 The Major Risks and ­Uncertainties Notes to the Liabilities 10–13...... 174 Topdanmark...... 9 to the Group in the Near-Term...... 31 Note to the Income Taxes 14...... 175 Associated Company Nordea...... 10 Dividends ...... 32 Notes to the Liabilities and Commitments 15–16...... 176 Mandatum Life...... 11 The New Dividend Policy...... 32 Notes to the Staff and Management 17–19...... 176 Holding...... 13 Dividend Proposal...... 32 Note to the Shares Held 20...... 177 Other Developments...... 14 Key Figures...... 33 Changes in the Group Structure ...... 14 Calculation of the Key Figures...... 36 Approval of the Financial Statements Changes in Group Management ...... 16 Group’s IFRS Financial Statements...... 38 and the Board of Directors’ Report...... 178 Governance and Related Issues...... 18 Statement of Profit and Other Comprehensive ...... Governance...... Auditor’s Report 179 18 Income, IFRS...... 39 Annual General Meeting...... 18 Consolidated Balance Sheet, IFRS...... 40 Corporate Responsibility...... 19 Statement of Changes in Equity, IFRS...... 41 Personnel ...... 19 Statement of Cash Flows, IFRS...... 42 Remuneration ...... 20 Risk Management...... 21 Group’s Notes to the Accounts...... 43 Shares, Share Capital and Shareholders ...... 22 Summary of Significant Accounting Policies...... 44 Shares and Share Capital...... 22 Segment Information...... 62 Authorizations Granted to the Board...... 24 Material Partly-Owned Subsidiairies...... 67 Shareholders...... 24 Business Acquisitions...... 68 Holdings of the Board Group’s Other Notes to the Accounts...... 69 and Executive Management...... 26 Financial Standing ...... 27 Sampo plc’s Financial Statements...... 167 Extra Dividend in the Form of Nordea Shares.. 27 Sampo plc’s Income Statement...... 168 Internal Dividends...... 27 Sampo plc’s Balance Sheet...... 169 REPORTS FOR THE YEAR 2019 WWW.SAMPO.COM/YEAR2019 Ratings...... 28 Sampo plc’s Statement of Cash Flows...... 170

BOARD OF DIRECTORS’ REPORT AND FINANCIAL STATEMENTS 2019 2 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S REPORT DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

BOARD OF DIRECTORS’ REPORT 4 6 7 14 18 Sampo Group Economic Business Areas Other Governance and Environment Developments Related Issues If...... 7 Topdanmark...... 9 Changes in the Governance...... 18 Associated Company Group Structure...... 14 Annual General Meeting..... 18 Nordea...... 10 Changes in Group Corporate Responsibility....19 Mandatum Life...... 11 Management...... 16 Personnel...... 19 Holding...... 13 Remuneration...... 20 Risk Management...... 21 22 27 31 32 33 Shares, Share Capital Financial Standing Outlook Dividends Key Figures and Shareholders Extra Dividend in the Outlook for 2020...... 31 The New Dividend Policy... 32 Calculation of Form of Nordea Shares...... 27 the Key Figures...... 36 Shares and Share Capital... 22 The Major Risks and Dividend Proposal...... 32 Internal Dividends...... 27 Uncertainties­ to the Authorizations Group in the Near-Term...... 31 Granted to the Board...... 24 Ratings...... 28 Shareholders...... 24 Solvency...... 28 Holdings of the Board and Debt Financing...... 29 Executive Management...... 26

BOARD OF DIRECTORS’ REPORT 2019 3 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S REPORT DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Sampo plc - Board of Directors’ Report for 2019 Sampo Group

Sampo Group’s profit before taxes for 2019 amounted year (excluding extraordinary items). In addition share progress in the fourth quarter of 2019 towards achieving to EUR 1,541 million (2,094). The profit includes a loss buy-backs can be used to complement the cash dividend. its financial targets. In segment reporting the share of of EUR 155 million incurred when distributing Nordea Nordea’s profit is included in the segment ‘Holding’. For shares as dividends in the third quarter of 2019. The profit If segment’s profit before taxes rose to EUR 884 million 2019 Nordea targets a dividend of EUR 0.40 per share for the for the comparison year contains a positive non-­ (848). Underwriting performance continues on its (0.69). If the AGM approves this, Sampo plc will receive a recurring item of EUR 197 million from the Danske Bank excellent track. Insurance technical result amounted to dividend of EUR 322 million (594). co-operation agreement that Mandatum Life completed EUR 685 million (643) and combined ratio for full-year in the second quarter of 2018. The total comprehensive 2019 was 84.5 per cent (85.2). Return on equity amounted Profit before taxes for the segment Mandatum amounted income for the period, taking changes in the market value to 34.5 per cent (11.2). Premiums grew strongly in all to EUR 280 million (450). The profit for the comparison of assets into account, rose to EUR 1,565 million (1,034). business areas in the Nordics amounting to 5.7 per cent year includes a contribution of EUR 197 million from with fixed currencies. If lowered the discount rate applied the Danske Bank co-operation agreement in the second Earnings per share was EUR 2.04 (3.04) and marked-to- in Finland from 1.2 per cent to 0.95 per cent. This had a quarter of 2018. Return on equity rose to 23.5 per cent market earnings per share was EUR 2.63 (1.70). Marked- negative impact of EUR 62 million on the results. If paid a (8.7). Mandatum Life’s Board proposes a dividend of EUR to-market earnings were boosted by strong equity market dividend of SEK 7.5 billion (EUR 710 million) to Sampo plc 150 million to be paid to Sampo plc in the first quarter of development. Return on equity for the Group amounted in December 2019. 2020. to 12.0 per cent (7.5) for 2019. Net asset value per share on 31 December 2019 increased to EUR 20.71 (20.60). Topdanmark had another strong year and segment’s profit Sampo Group’s total investment assets, excluding before taxes rose to EUR 238 million (199). The combined Topdanmark’s life insurance assets, on 31 December 2019 Sampo plc’s Board of Directors is proposing at the Annual ratio amounted to 82.1 per cent (82.3). ­Topdanmark’s amounted to EUR 21.8 billion (21.7), of which 76 per cent General Meeting to be held on 23 April 2020 a dividend Board of Directors proposes to the AGM of 2020 a was invested in fixed income instruments (79), 16 per cent of EUR 2.20 per share (2.85). The proposed dividend pay- ­dividend of DKK 17 per share. If approved Sampo plc’s in equities (14) and 8 per cent in other assets (7). If’s share ment amounts in total to EUR 1,222 million (1,583). The share of the dividend payment is EUR 96 million. of assets was 50 per cent (50), Topdanmark’s 13 per cent Board has on 6 February 2020 approved a new dividend (13), Mandatum Life’s 26 per cent (26) and Sampo plc’s 11 policy according to which total annual dividends paid Sampo’s share of Nordea’s net profit for 2019 amounted per cent (11). will be at least 70 per cent of Group's net profit for the to EUR 290 million (625). Nordea made encouraging

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Sampo Group’s equity as at 31 December 2019 amounted Key Figures to EUR 11,908 million (12,386), excluding the minority Sampo Group, 2019 share of EUR 635 million (628). Dividend payments, both EURm 2019 2018 Change, % cash dividend and dividend in kind, of EUR 1,902 million Profit before taxes )* 1,541 2,094 -26 reduced the equity and the comprehensive income for the If 884 848 4 Topdanmark 238 199 20 year of EUR 1,565 million increased it. Associates (Nordea & NDX Intressenter) 298 621 -52 Mandatum *) 280 450 -38 Sampo Group’s solvency capital is as of October 2019 Holding (excl. Associates) -159 -3 - ) calculated according to the Solvency II rules. At the end of Profit for the period ** 1,237 1,778 -30

2019 the solvency ratio stood at 167 per cent (140). 2019 2018 Change Earnings per share, EUR *) 2.04 3.04 -1.00 Sampo Group will issue a report on non-financial EPS (incl. change in FVR), EUR 2.63 1.70 0.93 NAV per share, EUR 20.71 20.60 0.11 information in accordance with Chapter 3a, Section 5 of Average number of staff (FTE) 9,813 9,509 304 the Accounting Act. The report, Corporate Responsibility Group solvency ratio, % 167 140 27 Report 2019, will be separate from the Board of Directors’ RoE, % 12.0 7.5 4.5 Report and will be published in May 2020. *) the comparison year includes the contribution of EUR 197 million from the Danske Bank co-operation agreement in the second quarter of 2018. **) of which non-controlling interests are EUR 107 million (91) for 2019. Income statement items are compared on a year-on-year basis and comparison figures for balance sheet items are from 31 December 2018 unless otherwise stated.

Exchange Rates used in Reporting

1–12/2019 1–9/2019 1–6/2019 1–3/2019 1–12/2018 EURSEK Income statement (average) 10.5853 10.5679 10.5181 10.4187 10.2583 Balance sheet (at end of period) 10.4468 10.6958 10.5633 10.3980 10.2548 DKKSEK Income statement (average) 1.4183 1.4158 1.4090 1.3959 1.3764 Balance sheet (at end of period) 1.3982 1.4326 1.4153 1.3929 1.3733 NOKSEK Income statement (average) 1.0749 1.0816 1.0810 1.0694 1.0688 Balance sheet (at end of period) 1.0591 1.0809 1.0897 1.0765 1.0308 EURDKK Income statement (average) 7.4 661 7.4 6 4 4 7.4 651 7.4 637 7.4533 Balance sheet (at end of period) 7.471 5 7.4 662 7.4 636 7.4 652 7.4 673

BOARD OF DIRECTORS’ REPORT 2019 5 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S REPORT DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Economic Environment

The global economy is expected to have grown at a In Finland expected growth dropped to 1.5 per cent, decision to raise rates towards the end of the year despite modest pace of 2.8 per cent in 2019, which is slightly with investments falling by 0.7 per cent and private weak economic data. The rate hike was largely motivated less than the previous year’s figure. One of the main ­consumption stalling, 2019 was a generally challenging by concerns over possible adverse effects stemming from reasons for the expected drop has to do with decreased year for the Finnish economy. Investments were negative rates. investments among major economies, such as the EU, depressed particularly due to decreased construction USA and China, driven by perceived threats surrounding starts and private consumption only saw somewhat In Norway the economy grew at an expected 2.5 per cent, the fluidity of international trade. Earlier in the year, the of a rebound in the latter half of the year. Despite a which was propped up by a stable global demand for oil US-China trade spat escalated in a tit-for-tat increase global economic slowdown, Finland did experience a and new investments into oil production. During the year, on imposed tariffs. In addition, the risks posed by a moderately strong pickup in exports compared to imports oil related investments grew by 14 per cent, which partly hard Brexit decreased foreign investments into the UK. balancing out the current account. The unemployment off-set the slump in foreign direct investments within the While some of the major politico-economic hurdles were rate has been falling since 2016 although the trend did not Nordic region. Unemployment dropped to 3.7 per cent, overcome as of late 2019, concrete solutions to other continue into 2019, as the unemployment has been flat at which was the lowest out of the Nordics. Compared to issues, such as climate change, still remained to be found. 6.7 per cent since April. the rest of the world, Norway’s economy weathered the global trade uncertainties well. Due to a strong economy, The Nordic economies experienced somewhat of a In Sweden growth figures were slightly gloomier at Norway’s central bank hiked rates three times during the slowdown from the previous year, although Norway did an expected 1.1 per cent, driven internally by weak year. post a slight uptick in its growth figures. As the export- consumption growth and decreased levels of investment driven Nordic cluster is naturally sensitive to global particularly in the housing sector. Housing prices saw In Denmark the economy grew at an expected 2.1 per economic shocks, the global slowdown due to escalated a recovery from a drop in 2017, and towards the end cent, driven by increased exports as well as investments trade tensions markedly decreased intraregional of the year a lot of the past housing starts came into especially into the pharmaceutical industry. In addition, investments. While Denmark and Norway weathered fruition. One big driver for price increases has been the positive developments in real wages buffed by low interest the downward growth pressures somewhat better due urban sprawl driving up demand in major cities, such as rate payments increased Danish households’ disposable to greater utilisation of their respective labour forces, Stockholm and Gothenburg. However, unemployment incomes during the year leading to lower demand sided structural issues in both Sweden and Finland hindered rose to 6.8 per cent thereby placing a lot of potential risks. This has also increased aggregate real savings to overall growth potential. consumers without a paycheque and further contributing create a cushy buffer for a rainy day. Overall, Denmark’s to a weakish consumption growth figure of 1.0 per cent. economy performed solidly despite slower global growth. One of the bigger surprises in Sweden was the Riksbank’s

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Business Areas

Results If If, 2019

If is the leading property and casualty insurance company EURm 2019 2018 Change, % in the Nordic region, with insurance operations that Premiums, net 4,475 4,325 3 Net income from investments 229 229 0 also encompass the Baltic countries. The P&C insurance Other operating income 33 30 13 group’s parent company, If P&C Insurance Holding Ltd, is Claims incurred -2,751 -2,716 1 located in Sweden, and the If subsidiaries and branches Change in insurance liabilities -87 -35 147 provide insurance solutions and services in Finland, Staff costs -558 -529 6 Sweden, Norway, Denmark and the Baltic countries. If’s Other operating expenses -443 -445 -1 Finance costs -16 -15 7 operations are divided into four business areas: Private, Share of associates’ profit/loss 1 4 -87 Commercial, Industrial and Baltic. Profit before taxes 884 848 4

Profit before taxes for 2019 for the If segment was EUR 884 Key figures 2019 2018 Change Combined ratio, % 84.5 85.2 -0.7 million (848). Combined ratio amounted to 84.5 per cent Risk ratio, % 62.7 63.3 -0.6 (85.2) and risk ratio to 62.7 per cent (63.3). Cost ratio, % 21.8 21.9 -0.1 Expense ratio, % 16.1 16.4 -0.3 In 2019 EUR 190 million (173) was released from technical Return on equity, % 34.5 11.2 23.3 reserves relating to prior year claims. Return on equity Average number of staff (FTE) 6,865 6,603 262 increased to 34.5 per cent (11.2) and the fair value reserve on 31 December 2019 amounted to EUR 457 million (234).

Technical result was EUR 685 million (643). Insurance margin (technical result in relation to net premiums earned) rose to 15.9 per cent (15.1).

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Combined ratio, % Risk ratio, % The cost ratio was 21.8 per cent (21.9) and expense ratio 2019 2018 Change 2019 2018 Change Private 82.0 83.7 -1.7 60.3 61.8 -1.5 16.1 per cent (16.4). Commercial 88.3 86.9 1.4 65.9 64.4 1.5 Industrial 89.3 92.3 -3 69.8 71.2 -1.4 On 31 December 2019, the total investment assets of If Baltic 87.0 88.8 -1.8 58.4 60.0 -1.6 amounted to EUR 10.8 billion (10.9), of which fixed income

investments constituted 86 per cent (88), money market Sweden 76.5 79.7 -3.2 57.3 60.5 -3.2 Norway 88.4 85.7 2.7 66.7 63.1 3.6 2 per cent (2) and equity 12 per cent (10). Net income from Finland 87.4 88.6 -1.2 64.7 66.2 -1.5 investments amounted to EUR 229 million (229). Invest- Denmark 94.1 98.1 -4.0 66.0 69.0 -3 ment return marked-to-market for the full-year 2019 was 5.0 per cent (-0.8). Duration for interest bearing assets was 1.3 years (1.4) and average maturity 2.8 years (2.7). Fixed Large claims for If were EUR 4 million (29) worse than Gross written premiums amounted to EUR 4,675 million income running yield without taking into account the FX expected for the full-year 2019. In BA Industrial they (4,502) in 2019. With fixed currency rates premiums grew hedging cost as at 31 December 2019 was 1.8 per cent (1.7). were EUR 8 million better and in BA Commercial EUR 13 5.7 per cent in January – December 2019. All business million worse than expected in 2019. areas had growth. The growth was highest in the BA If’s solvency position is described in the section Industrial, at 16.5 per cent. In BA Private the premium Solvency­ . The Swedish discount rate used to discount the annuity growth amounted to 5.1 per cent and in BA Commercial reserves was -0.77 per cent (-0.41) at the end of 2019 and had 2.8 per cent. Gross written premiums grew by 5.1 per a negative effect on the full-year results of EUR 22 million. cent in Sweden, 9.5 per cent in Norway, 2.2 per cent in In Finland the discount rate for annuities was lowered from Finland and 5.0 per cent in Denmark. Positive customer 1.2 per cent to 0.95 during the fourth quarter which had a development continued in all business areas in 2019, the negative effect of EUR 62 million on the results. customer base in BA Private increased by 2 per cent.

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Topdanmark

Topdanmark is the second largest non-life insurance Results ­company and a major life insurance company in Topdanmark, 2019 ­Denmark. The company is listed on Nasdaq Copenhagen. EURm 2019 2018 Change, % In non-life insurance, Topdanmark has a 17 per cent Premiums, net 2,677 2,509 7 market share. Topdanmark focuses on the private, Net income from investments 1,037 -280 - agricultural and SME market. The company has around Other operating income 3 3 -17 620,000 customers and handles around 300,000 claims Claims incurred -1,223 -1,198 2 Change in insurance liabilities -1,864 -458 307 a year. In life insurance, Topdanmark has a 10 per cent Staff costs -272 -269 1 market share in Denmark. Other operating expenses -131 -119 10 Finance costs -10 -11 -4 At the end of 2019 Sampo plc held 41,997,070 Topdanmark Share of associates’ profit/loss 22 22 2 shares, corresponding to 46.7 per cent of all shares and Profit before taxes 238 199 20 48.2 per cent of related voting rights in the company. The Key figures 2019 2018 Change market value of the holding was EUR 1,846 million on Combined ratio, % 82.1 82.3 -0.2 31 December 2019. Loss ratio, % 66.2 66.0 0.2 Expense ratio, % 16.0 16.3 -0.3 The Board of Directors recommends to the AGM of 2020 a Average number of staff (FTE) 2,322 2,314 8 dividend of DKK 1,530 million (EUR 205 million), i.e. DKK 17 per share. If the AGM approves the proposal, Sampo plc’s share of the dividend payment is EUR 96 million. The following text is based on Topdanmark’s full-year 2019 result was impacted positively by improved investment Topdanmark’s profit before taxes for 2019 increased in result release published on 23 January 2020. returns. Sampo Group’s profit and loss account to EUR 238 million (199). The combined ratio amounted to 82.1 per cent (82.3) In non-life insurance, result was positively impacted by Topdanmark’s premium income increased by 2.9 per cent in 2019. The expense ratio was 16.0 per cent (16.3). higher run-off profit and an improved claims trend in the in non-life insurance and by 9.8 per cent in life insurance. SME and the agricultural business. On the other hand, the result from illness and accident and lower yield curve In non-life insurance, the run-off profit of EUR 58 was had a negative impact on results. In the life insurance, the primarily generated in motor third-party liability,

BOARD OF DIRECTORS’ REPORT 2019 9 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S REPORT DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

in workers’ compensation, and in illness and accident. Associated Company Nordea average price paid per share amounted to EUR 6.46 and Weather-related claims were EUR 13 million below normal the book value in the Group accounts was EUR 8.34 per level and amounted to EUR 10 million. Large claims were Nordea is the largest bank in the Nordic region and among share. The closing price as at 31 December 2019 was EUR EUR 6 million below normal level and amounted to EUR the ten largest financial groups in Europe in terms of total 7.24. 7 million. market capitalization with around 11 million customers. Nordea’s shares are listed on the Nasdaq exchanges in Nordea targets a dividend of EUR 0.40 per share (0.69) for Topdanmark’s solvency position is described in the Stockholm, Helsinki and Copenhagen. In Sampo Group’s 2019. Sampo plc’s share amounts to EUR 322 million (594) section Solvency. reporting Nordea is treated as an associated company and if approved by the AGM. is included in the segment Holding. Further information on Topdanmark A/S and Sampo’s share of Nordea’s 2019 profit before taxes its January-December 2019 result is available at On 31 December 2019 Sampo plc held 804,922,858 Nordea amounted to EUR 290 million (625). www.topdanmark.com. shares corresponding to a holding of 19.87 per cent. The

BOARD OF DIRECTORS’ REPORT 2019 10 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S REPORT DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Mandatum Life Results Mandatum Life, 2019 Mandatum Life Group comprises Mandatum Life EURm 2019 2018 Change, % ­Insurance Company Ltd., a wholly-owned subsidiary Premiums written 1,596 1,074 49 of Sampo plc, operating in Finland, Estonia, Latvia and Net income from investments 1,267 -26 - Lithuania, and its subsidiaries. The parent company, Other operating income 23 212 -89 Claims incurred -1,492 -1,116 34 Mandatum Life, is responsible for sales functions and all Change in liabilities for inv. and ins. contracts -971 426 - the functions required by the Insurance Companies Act. Staff costs -52 -46 13 The operating subsidiaries are Mandatum Life Services Other operating expenses -81 -67 21 Ltd, Mandatum Life Investment Services Ltd. and Finance costs -9 -7 24 Mandatum Life Fund Management S.A. Profit before taxes 280 450 -38

Key figures 2018 2018 Change Profit before taxes for Mandatum Life in 2019 amounted Expense ratio, % 98.7 92.1 6.6 to EUR 280 million (450). The comparison figure includes Return on equity, % 23.5 8.7 14.8 the contribution of EUR 197 million from the Danske Average number of staff (FTE) 563 531 32 Bank co-operation agreement in the second quarter of 2018. The total comprehensive income for the period after tax reflecting the changes in market values of assets, Net investment income, excluding income on unit-linked EUR 8 billion for the first time and were EUR 8.1 billion increased to EUR 308 million (112). Return on equity contracts, increased to EUR 358 million (232). Net income (7.0) at the end of 2019. Unit-linked reserves corresponded amounted to 23.5 per cent (8.7). from unit-linked contracts was EUR 908 million (-259). to 67 per cent (62) of total technical reserves. During 2019 the fair value reserve increased to EUR 438 Premium income on own account increased to EUR million (352). With-profit reserves decreased as planned during 2019 1,596 million (1,074). Premiums from unit-linked policies and amounted to EUR 3.9 billion (4.2) on 31 December increased to EUR 1,476 million (976). Claims incurred The expense result decreased to EUR 24 million (35). The 2019. With-profit reserves related to the higher guarantees increased to EUR 1,492 million (1,116). Both premium risk result increased to EUR 35 million (33). of 4.5 and 3.5 per cent decreased by EUR 264 million to income and claims paid include around EUR 400 million EUR 2.2 billion at the end of 2019. one-off items caused by changes in the tax treatment of The total technical reserves of Mandatum Life Group were life insurance products. EUR 12.0 billion (11.2). The unit-linked reserves exceeded

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Mandatum Life has overall supplemented its technical covering unit-linked liabilities, amounted to EUR 5.7 The assets covering the segregated fund amounted to reserves with a total of EUR 230 million (232), of which billion (5.6) at market values. EUR 1.0 billion (1.0), of which 68 per cent (77) was in fixed EUR 189 million is allocated to years 2020 – 2022. The income, 13 per cent (5) in money market, 13 per cent (11) figure does not take into account the reserves relating to The assets covering Mandatum Life’s original with profit in equities and 4 per cent (6) in alternative investments. the segregated fund. The discount rate used for 2020 and liabilities at the end of 2019 amounted to EUR 4.7 billion Segregated fund’s investment return marked-to-market 2021 is 0.25 per cent. In the fourth quarter of 2019, the rate (4.6) at market values. 46 per cent (49) of the assets are was 6.4 per cent (-1.9). On 31 December 2019 the duration used for 2022 was lowered from 2.50 per cent to 1.25 per in fixed income instruments, 15 per cent (9) in money of fixed income assets was 2.8 years (2.5) and average cent. market, 25 per cent (27) in equities and 14 per cent (15) in maturity 3.2 years (3.1). Fixed income running yield alternative investments. The investment return marked- without taking into account the FX hedging cost was 1.9 Discount rate of segregated liabilities was decreased from to-market for 2019 was 9.2 per cent (-2.4). The duration of per cent (2.4). 0.50 per cent to 0.0 per cent and discount rate reserve of fixed income assets at the end of 2019 was 2.8 years (2.5) segregated liabilities amounted to EUR 263 million (250). and average maturity 2.9 years (2.8). The fixed income Mandatum Life’s solvency position is described in the running yield without taking into account the FX hedging section Solvency. At the end of 2019 Mandatum Life Group’s investment cost was 2.4 per cent (2.7) on 31 December 2019. assets, excluding the assets of EUR 8.2 billion (7.0)

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Holding Results Holding, 2019 Sampo plc owns and controls its subsidiaries engaged in EURm 2019 2018 Change, % P&C and life insurance. In addition, Sampo plc held on Net investment income -2 2 - 31 December 2019 approximately 19.9 per cent of the share Other operating income 16 17 -5 capital of Nordea, the largest bank in the Nordic countries. Staff costs -15 -11 38 Nordea is an associated company to Sampo plc. As of Other operating expenses -13 -14 -10 Finance costs 10 3 232 March 2018 Sampo plc has also treated NDX Intressenter Share of associates’ profit 298 621 -52 AB, of which Sampo plc owns 36.25 per cent, as an Valuation loss on distribution of Nordea shares -155 - - associate. The company was established for the takeover of Profit before taxes 139 618 -77 Nordax Group AB. Key figures 2019 2018 Change Average number of staff (FTE) 63 61 2 Holding segment’s profit before taxes for January – December 2019 amounted to EUR 139 million (618), which includes EUR 155 million loss incurred when distributing Nordea shares as dividends in the third quarter of 2019. Sampo’s share of profits of associated companies Nordea The segment’s profit before taxes excluding the associates Sampo plc’s holding in Nordea was booked in the and NDX Intressenter for January – December 2019 for January – December 2019 was EUR -159 million (-3). ­consolidated balance sheet at EUR 6.7 billion, i.e. EUR 8.34 amounted to EUR 298 million (621) of which Nordea’s per share. The market value of the holding was EUR 5.8 share was EUR 290 million (625) and NDX Intressenter’s Changes in market values of derivative instruments and billion, i.e. EUR 7.24 per share, on 31 December 2019. EUR 8 million (-4). Nordea’s result was impacted by currency exchange rates can cause volatility in the net one-off items amounting to EUR 1.3 billion. investment income and finance cost lines.

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Other Developments

Changes in the Viking is a Nordic roadside assistance company head- service for its insurance customers and partners such Group Structure quartered in Norway. It serves its customers through as ­carmakers. The financial effect of the acquisition on an extensive nationwide network of stations in Norway, Sampo Group is not expected to be significant. If P&C Insurance Holding Ltd (publ) signed on Sweden, Denmark and Finland. The acquisition of 28 ­November 2019 an agreement to buy Viking Viking will strengthen If’s offering towards its partners The transaction was subject to approval by competition ­Redningstjeneste TOPCO A/S. The acquisition price for and further improve If’s position as the leading Nordic authorities in Norway and Sweden which were received in 100 per cent ownership was EUR 32 million (NOK 325 insurance and service provider within the mobility area. early January 2020 and the transaction was completed. million) which was paid in cash. The enterprise value amounted to EUR 114 million. With this strategic acquisition If strengthens its position in the Nordics by providing more comprehensive

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Group Structure 31 December 2019

Sampo plc Finland

100% 100% 46.7% < 20%

If P&C Insurance Mandatum Life Topdanmark Nordea Holding Ltd (publ) Insurance Company Ltd A/S Bank Abp Sweden Finland Denmark Finland

If P&C Insurance Ltd Mandatum Life Topdanmark 100% (publ) 100% Services Ltd 100% Kapitalforvaltning A/S Sweden Finland Denmark

If P&C Insurance AS Mandatum Life Topdanmark 100% 100% Investment Services Ltd 100% Forsikring A/S Estonia Finland Denmark

If Livförsäkring AB Mandatum Life 100% 100% Sweden Fund Management S.A. Luxembourg Topdanmark 100% Liv Holding A/S Denmark

Topdanmark 100% Livsforsikring A/S Denmark

BOARD OF DIRECTORS’ REPORT 2019 15 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S REPORT DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Changes in Group Management On 7 February 2019 Sampo's Board of Directors appointed Torbjörn Magnusson was elected as Chairman of Nordea Torbjörn Magnusson, the CEO of If, to succeed Stadigh Bank at the AGM held on 28 March 2019. Knut Arne Alsaker, 45, took over as the new Group as Group CEO and President of Sampo Group, effective CFO as of 1 of January 2019. He was earlier CFO of If P&C 1 January 2020. Magnusson took immediately over as On 6 November 2019 Ricard Wennerklint, 50, was Group and is a member of the Sampo Group Executive Chairman of If P&C. appointed Chief of Strategy in Sampo Group as of Committee. 1 January 2020. He has held various positions in Sampo The Sampo and If Boards appointed Morten Thorsrud, Group since 2002 and been a member of the Sampo Group Sampo’s Group CEO and President Kari Stadigh retired the Head of If Business Area Private, on 7 February 2019 Executive Committee since 2005. on 31 December 2019. He also stepped down as Chairman to succeed Magnusson as the CEO of If, effective immedi- of If P&C Insurance as of 7 February 2019 and as Chairman ately. Thorsrud was in turn succeeded by Ingrid Janbu of Mandatum Life Insurance Company 30 June 2019. Holthe as Head of If BA Private. She was also nominated Patrick Lapveteläinen took over as the Chairman of a member of the Group Executive Committee of Sampo Mandatum Life on the same day. Group.

BOARD OF DIRECTORS’ REPORT 2019 16 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S REPORT DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Organization 31 December 2019

If Finance Morten Thorsrud Måns Edsman

Private Mandatum Life Finance Ingrid Janbu Holthe Petri Niemisvirta Jukka Kurki Commercial Investment Solutions Ivar Martinsen Investments Lauri Vaittinen Industrial Patrick Lapveteläinen Danske Bank and Alliances Poul Steffensen Risto Honkanen* Baltic Group Finance Andris Morozovs Knut Arne Alsaker Key Customers and Sales Support Tarja Tyni Group CEO and President Risk Management Karin Friberg Kari Stadigh Risk Management Private Customers, Customer Service, (Until 31 Dec 2019) Kai Sotamaa IT and Baltics Torbjörn Magnusson Human Resources Sanna Rajaniemi (as of 1 Jan 2020) Johan Börjesson

Strategy Business Development IT Ricard Wennerklint (as of 1 Jan 2020) Petri Vieraankivi Kjell Rune Tveita

Legal Affairs Legal Affairs Investor Relations and Group Timo Vuokila Dag Rehme Communications Jarmo Salonen Marketing and Communications Marketing and Communications Niina Riihelä Katarina Mohlin

Internal Audit Ann-Marie Andtback Beckman Finance Lars Thykier

Operations Topdanmark Brian Rothemejer Jacobsen Peter Hermann Technology Thomas Erichsen *Until 31 December 2019, Jussi Karppinen as of 1 January 2020

BOARD OF DIRECTORS’ REPORT 2019 17 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S REPORT DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Governance and Related Issues

Governance The authorization is valid until the next Annual General Corporate Governance Code 2015. Furthermore, all Board Meeting. members but Antti Mäkinen have been determined to be During 2019 Sampo complied in full with the Finnish independent of the major shareholders. Corporate Governance Code 2015 approved by the The Annual General Meeting adopted the financial Securities Market Association on 1 October 2015, effective accounts for 2018 and discharged the Board of Directors The Annual General Meeting decided to pay the following from 1 January 2016 (the “CG Code 2015”). and the Group CEO and President from liability for the fees to the members of the Board of Directors until the financial year. close of the 2020 Annual General Meeting: the Chairman Acting in compliance with the Corporate Governance of the Board will be paid an annual fee of EUR 175,000 Code, Sampo publishes a separate Corporate The Annual General Meeting elected eight members and other members of the Board will be paid EUR ­Governance Statement on its website in fulfillment to the Board of Directors. The following members were 90,000 each. Furthermore, the members of the Board of the requirement referred to in the Finnish Securities re-elected to the Board: Christian Clausen, Jannica and its Committees will be paid the following annual Markets Act (746/2012), chapter 7, section 7. Fagerholm, Veli-Matti Mattila, Risto Murto, Antti fees: the Vice Chairperson of the Board EUR 25,000, the Mäkinen and Björn Wahlroos. Fiona Clutterbuck ­Chairperson of the Audit Committee EUR 25,000 and The statement will be available at and Johanna Lamminen were elected as new members the member of the Audit Committee EUR 6,000. A Board www.sampo.com/statement and to the Board. The Members of the Board were elected member shall in accordance with the resolution of the www.sampo.com/year2019. for a term continuing until the close of the next Annual Annual General Meeting acquire Sampo plc's A shares at General Meeting. the price paid in public trading for 50 per cent of his/her annual fee excluding taxes and similar payments. Annual General Meeting At its organizational meeting, the Board elected Björn Wahlroos as Chairman and Jannica Fagerholm as Vice Ernst & Young Oy was elected as Auditor. The Auditor The Annual General Meeting of Sampo plc, held on Chairperson. Veli-Matti Mattila, Risto Murto, Antti will be paid a fee determined by an invoice approved by 9 April 2019, decided to distribute a dividend of EUR 2.85 Mäkinen and Björn Wahlroos (Chairman) were elected Sampo. Kristina Sandin, APA, will act as the principally per share for 2018. The record date for dividend payment to the Nomination and Compensation Committee and responsible auditor. was 11 April 2019 and the dividend was paid on 18 April Christian Clausen, Fiona Clutterbuck, Jannica Fagerholm 2019. In addition to the cash dividend, the Annual General (Chairman), and Johanna Lamminen to the Audit There were 1,052 shareholders represented at the Meeting decided to authorize the Board of Directors Committee. ­beginning of the meeting holding altogether 360,849,587 to resolve, in its discretion, on the distribution of an shares and 365,649,587 votes in the company. extra dividend up to EUR 500,000,000 (EUR 0.9 per All the Board members have been determined to be inde- share) either in cash and/or in financial instruments. pendent of the company under the rules of the Finnish

BOARD OF DIRECTORS’ REPORT 2019 18 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S REPORT DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Corporate Responsibility of employee well-being, diversity and equality, and In addition to the group-level report, further information employee engagement. This is to better measure Sampo on If and Topdanmark’s corporate responsibility Sampo is committed to developing the corporate respon- Group’s performance in these areas. The work continues activities can be found in their respective reports. sibility activities, targets, measurements, and reporting in 2020. The reports of If and Topdanmark are available of the Group. This is in the interests of, and expected, by at www.sampo.com/year2019. More information the Group’s various internal and external stakeholders. Responsible Investment Management and Operations: on Mandatum Life’s activities can be found from the During 2019, Sampo continued to work on corporate During 2019, Sampo strengthened the investment policies company website uusi.mandatumlife.fi/en/company/ responsibility in line with the Group’s updated corporate of the Group companies by adding further instructions Corporate-Responsibility. responsibility themes: Responsible Business ­Management on how to take the environmental, social, and governance and Practices, Responsible Corporate Culture, (ESG) issues into account in the investment process. ­Responsible Investments Management and Operations, Depending on the asset classes, different ESG strategies, Personnel and Responsibility in Communities. such as ESG integration, norm-based screening, sector-based screening, and active ownership, are used as The average number of Sampo Group’s employees (FTE) Responsible Business Management and Practice: During of 2020. Sampo Group also signed the UN Principles for in 2019 amounted to 9,813 (9,509). the year, the group-level Corporate Responsibility Responsible Investment (PRI) in April 2019. Steering Group started its work and convened two times. If is Sampo Group’s largest business area and employed Corporate responsibility covers a wide range of topics Responsibility in Communities: In 2019, Sampo assessed on average 70 per cent of the personnel. Topdanmark relevant for key business operations, therefore a steering the UN Sustainable Development Goals (SDGs) and the employed 24 per cent and Mandatum Life approximately group helps to guide the work on a group-level. In August underlying targets in order to identify group-level SDGs. 6 per cent of the personnel. The parent company Sampo 2019, Sampo Group joined the UN Global Compact and During the project, all 17 SDGs and 169 targets were plc employed 1 per cent of the work force. is committed to its ten principles concerning human evaluated in relation to the Group companies’ businesses rights, labor practices, environment, and anti-corruption. and the Group’s corporate responsibility themes. The In geographical terms Denmark had 30 per cent of the Further, Sampo updated group-level principles, e.g. assessment showed that Sampo Group can have an impact personnel, Finland 23 per cent, Sweden 23 per cent and Sampo Group Code of Conduct, to better reflect the needs on all the SDGs, but the positive impact is the strongest on Norway 14 per cent. The share of other countries was 10 of the corporate responsibility in general and the Global goals 3, 4, 5, 8, 10, 11, 12, 13, and 17. per cent. Compact. Sampo also initiated group-level greenhouse gas reporting to support the previously available­ Sampo Group will issue a report on non-financial The total number of staff in If increased 4 per cent. As of ­company-level reporting. ­information in accordance with Chapter 3a, Section 5 31 December 2019 If employed 6,925 persons. of the Accounting Act. The report, Sampo Group Responsible Corporate Culture: In 2019, Sampo focused ­Corporate Responsibility Report 2019, will be separate on identifying group-level key performance indicators from the Board of Directors’ Report and published in to improve group-level reporting for example in terms May 2020 at www.sampo.com/year2019.

BOARD OF DIRECTORS’ REPORT 2019 19 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S REPORT DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Topdanmark employed 2,366 persons at the end of the The different forms of remuneration used in Sampo and the fulfillment of solvency capital requirements. year and the total number of staff increased 2 per cent. Group are the following: Furthermore, the payment of a certain portion of the variable compensation payable to the Senior Executive The total number of staff in Mandatum Life increased (a) Fixed Compensation Management and to certain key persons shall be deferred 8 per cent. As of 31 December 2019 Mandatum Life (b) Variable Compensation for a defined period of time as required in the regulatory employed 573 persons. (c) Pension framework applicable to each Sampo Group company. (d) Other Benefits After the deferral period, a retrospective risk adjustment Sampo plc had 64 employees (61) at the end of 2019. review shall be carried out and the Board of Directors of The starting point of any compensation mechanism each Sampo Group company shall decide whether the At the end of the year, the total number of staff in Sampo shall be to encourage and stimulate employees to do deferred variable compensation shall be paid/released Group totaled 9,927 persons. their best and surpass their targets. Remuneration in full, partly or cancelled in whole. In 2019, altogether packages shall be designed to reward fairly for prudent EUR 10.5 million (7.0) of short-term and long-term More detailed information on personnel in Sampo and successful performance. At the same time, however, incentives has been deferred. Group is available in Sampo Group Corporate in order to safeguard the interest of other stakeholders, ­Responsibility Report 2019 to be published in May 2020 compensation mechanisms shall not generate conflicts of The Board of Directors decides on multiannual long-term at www.sampo.com/year2019. interest and shall not entice or encourage employees to incentive schemes for the management and other key excessive or unwanted risk taking. Thus, compensation employees of Sampo Group. In the long-term incentive mechanisms cannot be separated from risk management scheme 2014:1/2, altogether 21,525 units remain and will Remuneration objectives and practices. vest during 2020. In the long-term incentive scheme 2017:1, altogether 4,033,000 allocated incentive units Sampo plc’s Board of Directors has established the Sampo The relative proportions of fixed and variable remain and will vest during 2020 – 2023. Group Remuneration Principles, which apply to all Sampo ­compensation reflect the responsibilities of individual Group companies. The Remuneration Principles are executives and employees. Fixed salaries shall represent a The value of one incentive unit is calculated as the available at www.sampo.com/remuneration. sufficiently high share of the total remuneration. Variable difference between the trade-weighted average price compensation may be based on the contribution to the of the Sampo A share at the time of payment and the Sampo Group’s remuneration strategy shall be responsible­ company’s profitability and on individual performance or dividend-adjusted starting price. In addition to the towards employees and shareholders. This means that the linked to committing employees to Sampo Group. share price development, the calculation of the value of long-term financial stability and value creation of Sampo one incentive unit takes into account the performance Group shall guide the remuneration design. The decision on payout of variable compensation shall of the insurance margin of If P&C and the return on be based on the assessment of the incurred risk exposure capital at risk as further specified in the terms of the

BOARD OF DIRECTORS’ REPORT 2019 20 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S REPORT DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

respective incentive scheme. Both incentive schemes the Remuneration Statement, which is available at Thirdly, Sampo prefers low leverage and adequate contain a cap for maximum payout. The terms and www.sampo.com/remunerationstatement­ . The liquidity buffers to be able to generate liquidity as needed. conditions of the incentive schemes are available at statement has been prepared in accordance with the The size of assessed diversification benefits of the Group www.sampo.com/incentiveterms. Corporate Governance Code 2015 issued by the Securities companies’ profits is reflected in Sampo’s decisions on its Market Association and effective as of 1 January 2016. capital structure and liquidity position. A deferral rule applies to incentive rewards paid to key The Remuneration Report prepared in accordance with employees who are considered as identified staff and the new Corporate Governance Code 2020, approved by Sampo Group companies operate in business areas where are subject to the deferral rule in accordance with the the Securities Market Association on 19 September 2019, specific features of value creation are the pricing of risks ­remuneration policies of the relevant Sampo Group effective from 1 January 2020 has to be published first and the active management of risk portfolios in addition ­companies in force at the launch of the incentive time for the financial year starting on 1 January 2020. to sound customer services. Successful management of schemes. At payout from the schemes, the identified underwriting risks and investment portfolio market risks is staff shall acquire Sampo A shares with a certain part of the main source of earnings for Sampo Group companies. the installment after deducting income tax and other Risk Management comparable charges. The shares are subject to disposal In Sampo Group the risks associated with business restrictions for three years, after which the Board of As dividends are Sampo plc’s major source of income, activities fall into three main categories: business risks Directors shall decide on the possible release. its primary target for every sub-group is to maintain associated with external drivers affecting the competitive a healthy balance between profits, risks and capital to environment or resulting from lack of internal ­operational In 2019 EUR 18 million (23), including social cost, was paid facilitate a steady stream of dividend payments in the flexibility, reputational risk associated with the on the basis of the long-term incentive schemes. EUR 40 long term. ­company’s business practices or associations and risks million (36), including social costs, was paid as short-term inherent in business operations. incentives during the same period. The result impact of The second target is ensuring stable profitability at the long-term incentive schemes in force in 2019 was EUR business portfolio level. Potential risk concentrations A more detailed description of Sampo Group’s risk 12 million (5). and more generally the correlation of reported profits management activities, governance, risks and capitaliza- are monitored closely and their sources are analyzed. To tion is available in the Risk Management Report 2019 at Sampo Group will publish in March 2020 the the extent possible risk concentrations are proactively www.sampo.com/year2019. ­Remuneration Report 2019 at www.sampo.com/ managed by strategic decisions. year2019. The Remuneration Report 2019 is part of

BOARD OF DIRECTORS’ REPORT 2019 21 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S REPORT DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Shares, Share Capital and Shareholders

Shares and Share Capital Shareholders by the Number of Shares Held Sampo plc, 31 December 2019 As at 31 December 2019, Sampo plc had 555,351,850 Shareholders, Share-­­ Shares, Voting rights, Voting Number of shares number holders, % number Shares, % number rights, % shares, which were divided into 554,151,850 A shares and 1–100 58,736 46.10 2,881,309 0.52 2,881,309 0.51 1,200,000 B shares. The total number of votes attached to 101–500 45,978 36.08 11,435,251 2.06 11,435,251 2.04 the shares is 560,151,850. Each A share entitles the holder 501–1,000 10,968 8.61 8,290,298 1.49 8,290,298 1.48 to one vote and each B share entitles the holder to five 1,001–5,000 9,742 7.65 20,587,899 3.71 20,587,899 3.68 votes at the General Meeting of Shareholders. According 5,001–10,000 1,102 0.87 7,892,207 1.42 7,892,207 1.41 10,001–50,000 711 0.56 14,049 144 2.53 14,049,144 2.51 to the company’s Articles of Association, A shares 50,001–100,000 82 0.06 5,950,097 1.07 5,950,097 1.06 must number at least 179,000,000 and no more than 100,001–500,000 69 0.05 13,668,419 2.46 13,668,419 2.44 711,200,000. Meanwhile, B shares must number at least 500,001– 36 0.03 470,597,226 84.74 475,397 226 84.87 zero and no more than 4,800,000. As at 31 December 2019 Total 127,424 100 555,351,850 100 560,151,850 100 Sampo plc's share capital amounted to EUR 98 million of which nominee registered 11 352,026,281 63.39 352,026,281 62.85 (98) and the equity capital in total to EUR 12,542 million On waiting list, total - - - - - (12,386). Total number of shares issued 555,351,850 100 560,151,850 100

Sampo plc’s Articles of association contain a redemption obligation (16§) according to which a shareholder whose holding of all shares or of all votes relating to the shares reaches or exceeds 33 1/3 per cent or 50 per cent, is obliged to redeem, at the presentation of claims by other shareholders, their shares and the documents giving entitlement to the shares, as stipulated in the Finnish Sampo A shares have been quoted on the main list of the end of the financial year, neither Sampo plc nor its Group Companies Act, in the manner prescribed in the Article. Nasdaq Helsinki since 1988 and all of the B shares are held companies held any Sampo A shares. The Article contains further provisions on calculating the by Kaleva Mutual Insurance Company. B shares can be shareholder’s holding and redemption price. converted into A shares at the request of the holder. At the

BOARD OF DIRECTORS’ REPORT 2019 22 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S REPORT DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Graph 25

Share Price Performance Sampo plc, 2015–2019

EUR 50

45

40

35

30

25

20 2015 2016 2017 2018 2019 2020

Graph 26

Monthly Trading Volume Sampo plc, 2015–2019

Shares 50,000,000

40,000,000

30,000,000

20,000,000

10,000,000

0 2015 2016 2017 2018 2019 2020

● Volume, Nasdaq Helsinki ● Volume, other market places

BOARD OF DIRECTORS’ REPORT 2019 23 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S REPORT DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Authorizations Granted Shareholders to the Board Sampo plc, 31 December 2019

A and B shares Number of shares % of share capital % of votes The Annual General Meeting authorized the Board to Solidium Oy 55,278,580 9.95 9.87 repurchase a maximum of 50,000,000 Sampo A shares. Varma Mutual Pension Insurance Company 22,248,420 4.01 3.97 The price paid for the shares repurchased under the Ilmarinen Mutual Pension Insurance Company 6,917,673 1.25 1.23 authorization shall be based on the current market State Pension Fund 3,600,000 0.65 0.64 price of Sampo A shares on the securities market. The Elo Mutual Pension Insurance Company 2,939,300 0.53 0.52 Schweizerische Nationalbank 2,781,910 0.50 0.50 ­authorization will be valid until the close of the next Kaleva Mutual Insurance Company*) 2,672,719 0.48 1.33 Annual General Meeting, nevertheless not more than 18 OP-Finland Fund 2,521,892 0.45 0.45 months after AGM's decision. Keva 2,465,300 0.44 0.44 Oy Lival Ab 2,155,397 0.39 0.38 Sampo plc made no repurchases during 2019 and has not Svenska Litteratursällskapet I Finland r.f. 1,617,950 0.29 0.29 ODIN Norden 1,414,071 0.25 0.25 purchased its own shares after the end of the reporting OP Life Assurance Company Ltd. 1,357,859 0.24 0.24 period. Nordea Pro Finland Fund 1,131,663 0.20 0.20 Danske Invest Finnish Equity Fund 1,110,000 0.20 0.20 Nordea Nordic Fund 982,749 0.18 0.18 Shareholders Åbo Akademi University Foundation 906,550 0.16 0.16 Oppiva Invest Oy 778,780 0.14 0.14 Sigrid Jusélius Foundation 752,150 0.14 0.13 The number of Sampo plc’s shareholders increased during Nordea Life Assurance Finland Ltd. 727,149 0.13 0.13 2019 by 11,309 holders to 127,424 as at 31 December 2019. Foreign and nominee registered total 358,819,987 64.61 64.06 The holdings of nominee-registered and foreign share- Other 82,171,751 14.80 14.67 holders decreased to 64.6 per cent (66.5) of the shares and Total 555,351,850 100 100 *) 64.1 per cent of the votes (66.3). 1,472,719 A shares and 1,200,000 B shares

BOARD OF DIRECTORS’ REPORT 2019 24 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S REPORT DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Shareholders by Sector Sampo plc (A and B shares), 31 December 2019

Sector Number of shares % Corporations 68,476,008 12.33 Financial institutions and insurance corporations 19,681,305 3.54 Public institutions 39,312,155 7.08 Non-profit institutions 12,385,832 2.23 Households 56,676,563 10.21 Foreign ownership and nominee registered 358,819,987 64.61 Total 555,351,850 100

During 2019 Sampo plc received one notification of a Solidium Oy decreased on 2 April 2019 below ten (10) per The details of the notifications are available at change in holding pursuant to Chapter 9, Section 5 of cent of Sampo plc's entire stock and voting rights. After www.sampo.com/flaggings. the Securities Markets Act, according to which the total the notification Solidium holds 9.95 per cent of Sampo’s number of Sampo A shares and voting rights owned by shares and 9.87 per cent of the voting right.

BOARD OF DIRECTORS’ REPORT 2019 25 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S REPORT DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Holdings of the Board Shares Owned by the Board of Directors and the Group Executive Committee and Executive Management Sampo plc, 31 December 2019 and 31 December 2018

Board of Directors 31 Dec 2019 31 Dec 2018 The following table presents the Board’s and Group Wahlroos 4,946,969 6,633,436 Executive Committee’s holdings of Sampo A shares. At the Fagerholm 4,701 3,598 end of 2019, members of Sampo plc’s Board of Directors Clausen 2,129 1,479 and their close family members owned either directly Clutterbuck 753 0 or indirectly 4,969,859 (6,651,102) Sampo A shares. Their Lamminen 711 0 Mattila 6,870 6,203 combined holdings constituted 0.9 per cent (1.2) of the Murto 2,595 1,922 share capital and related votes. Mäkinen 5,131 4,464 Total 4,969,859 6,651,102 Members of the Group Executive Committee and their Board of Directors ownership of shares, % 0.9 1.2 spouses owned either directly or indirectly 888,544 Board of Directors share of votes, % 0.9 1.2 (842,582) Sampo A shares representing 0.2 per cent (0.2) of Group Executive Committee 31 Dec 2019 31 Dec 2018 the share capital and related votes. Stadigh 317,514 302,429 Magnusson 46,460 39,842 Alsaker 33,844 30,219 Janbu Holthe 0 0 Lapveteläinen 254,549 250,033 Martinsen 54,060 50,455 Niemisvirta 86,879 82,270 Thorsrud 55,524 51,591 Wennerklint 39,714 35,743 Total 888,544 842,582 Group Executive Committee's ownership of shares, % 0.2 0.2 Group Executive Committee's share of votes, % 0.2 0.2

BOARD OF DIRECTORS’ REPORT 2019 26 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S REPORT DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Financial Standing

Extra Dividend in the Form of cent resulting from the distribution of the share dividend Nordea targets a dividend of EUR 0.40 per share for 2019. Nordea Shares on behalf of shareholders. As a result of the distribution Sampo plc’s share amounts to EUR 322 million if approved of the extra dividend, Sampo’s ownership in Nordea by the AGM on 25 March 2020. Sampo plc’s Board of Directors announced on 13 June decreased below 20 per cent. Going forward, the Group’s 2019 that it plans to distribute an extra dividend in solvency is only calculated by the Solvency II rules and Topdanmark’s Board of Directors proposed to the Annual the form of Nordea Bank Abp shares. The distribution Nordea is treated as a normal equity investment. General Meeting of 2 April 2020 a dividend of DKK 17 per was decided upon on 7 August 2019. Each shareholder share. If the AGM approves the proposal, Sampo’s share received 1 Nordea share for each 10 Sampo shares. of the Topdanmark’s total dividend amounts to EUR 96 Fractional entitlements to Nordea shares resulting from Internal Dividends million. the distribution ratio were not distributed in the form of shares, but an equivalent amount was compensated to Sampo plc, Sampo Group’s parent company, received Mandatum Life’s Board proposes a dividend of EUR 150 shareholders in cash. The amount of Nordea Bank Abp more than EUR 1.5 billion in dividends from its subsidi- million to be paid to Sampo plc in the first quarter of shares distributed amounted to 55,517,639 shares and aries and associated company Nordea during 2019. The 2020. If normally pays its dividend towards the end of the the value of the share dividend, based on the volume following dividend payments were received: calendar year. weighted average price of Nordea on 12 August 2019, was EUR 5.661. The ex-dividend date was 8 August 2019 and • Mandatum Life; EUR 150 million in March 2019, the record date 9 August 2019. The payment date was • Nordea; EUR 594 million in April 2019, 12 August 2019 for the share dividend and 16 August 2019 • Topdanmark; EUR 84 million in April 2019 and for the cash compensation. • If; SEK 7.5 billion (EUR 710 million) in December 2019

In Finland, a share dividend is taxed similarly as cash dividend. Sampo paid the Finnish transfer tax of 1.6 per

BOARD OF DIRECTORS’ REPORT 2019 27 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S REPORT DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Ratings Solvency Position in the Subsidiaries Relevant ratings for Sampo Group companies on 31 December 2019 are presented in the table below. The insurance subsidiaries apply Solvency II rules in their regulatory solvency calculations. If Group companies Moody’s Standard & Poor’s use either partial internal models or standard model for Rated company Rating Outlook Rating Outlook calculation of their solo solvency position. Mandatum Life Sampo plc – Issuer Credit Rating A3 Stable A Stable reports in accordance with standard formula for Solvency If P&C Insurance Ltd – Insurance Financial Strength Rating A1 Stable A+ Stable If P&C Insurance Holding Ltd (publ) - Issuer Credit Rating - - A Stable II. Topdanmark uses a partial internal model to report its Mandatum Life Insurance Company Ltd – Issuer Credit Rating - - A+ Stable stand-alone solvency position.

If Group has an A+ rating from S&P which will continue to require significantly more capital than the standard Solvency Abp as an extra dividend (See section Extra dividend in the formula and therefore the use of standard formula has form of Nordea shares). As a result of the dividend, Sampo’s no practical implications on If Group’s capital position. Sampo’s capital requirement on Nordea holding increased ownership in Nordea decreased below 20 per cent. On 31 December 2019 If Group’s Solvency II capital more than EUR 800 million during the first half of 2019 ­requirement under standard formula amounted to EUR although the underlying risks for Sampo’s holding in Hence, the conglomerate rules (FICO) solvency calculation 1,890 million (1,833) and own funds to EUR 3,592 million Nordea did not change. Sampo took active measures to was terminated by a formal approval by the Finnish (3,599). The solvency ratio amounted to 190 per cent (196). counter the negative impact by issuing EUR 500 million FSA received on 21 October 2019. After the approval of hybrid capital in May 2019. More importantly, the Board Sampo Group calculates its group solvency only under The S&P A+ rating capital requirement for If Group received from the AGM in April 2019 an authorization the Solvency II rules and Nordea is treated as an equity amounted to EUR 3,083 million (2,949) on 31 December to distribute an extra dividend either in cash and/or in investment. Sampo Group’s solvency ratio according to the 2019 and the capital base was EUR 3,151 million (3,149). financial instruments held by Sampo plc and announced Solvency II directive amounted to 167 per cent (140) at the on 13 June 2019 that it planned to resolve on the distribu- end of December 2019. The proposed dividend has been Topdanmark calculates most of its non-life and health tion of an extra dividend in the form of Nordea shares in its deducted from own funds in the Solvency II calculation. risks and their respective solvency capital requirement meeting scheduled 7 August 2019. by a partial internal model approved by the DFSA. Other The consolidation of Nordea as an associated company in risks are calculated by Solvency II SCR standard formula. On 7 August 2019 Sampo Board made the formal decision Sampo Group’s Financial Statements (IFRS) will remain Topdanmark’s solvency ratio under the partial internal to distribute a total of 55,517,639 shares of Nordea Bank unchanged. model was 177 per cent (196) at the end of December 2019.

BOARD OF DIRECTORS’ REPORT 2019 28 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S REPORT DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Mandatum Life’s solvency ratio after transitional At the end of 2019 the interest bearing net debt of Sampo On 26 September 2019 Mandatum Life issued 30NC5 Tier ­measures amounted to 176 per cent (176) on 31 December plc amounted to EUR 2,183 million (2,108). The net debt 2 notes of EUR 250 million due 4 October 2049. 2019. Own funds were EUR 2,117 million (1,740) and calculation takes into account interest bearing assets and Solvency Capital Requirement (SCR) was EUR 1,204 liabilities. Gross debt to Sampo plc’s equity was 51 per cent On 31 December 2019 financial liabilities in Sampo plc’s million (990). The increase in own funds is mainly due (52) and financial leverage 34 per cent (34). balance sheet consisted of issued senior bonds and notes to the Tier 2 issue of EUR 250 million in September 2019 of EUR 3,414 million (3,943). In addition Sampo plc has and the positive equity market development during the On 23 May 2019 Sampo plc issued 30NC10 Fixed/Floating issued subordinated notes of EUR 494 million. No CPs reporting year. SCR grew because of increased market rate subordinated notes of EUR 500 million due 23 May were outstanding (124). The average interest, net of risk due to positive equity market development, a change 2049. interest rate swaps, on Sampo plc’s debt as of 31 December in the symmetrical adjustment and changes in contract 2019 was 1.2 per cent (0.8). boundary interpretations applied in calculating technical On 24 May 2019 Sampo plc repaid EUR 500 million senior provisions. Without transitional measures, own funds notes maturing on that date. More information on Sampo Group’s outstanding debt would have amounted to EUR 1,756 million (1,348) and the issues is available at www.sampo.com/debtfinancing. solvency capital requirement to EUR 1,234 million (1,030) leading to a solvency ratio of 142 per cent (131).

More information on Sampo Group’s capital policy is Outstanding Debt instruments available in the Risk Management Report 2019 at Sampo plc, 31 December 2019 www.sampo.com/year2019. Instrument & Nominal Coupon Swap Effective Rate Maturity Senior Bond 2,000 SEKm Stibor3M + 0.77% Euribor3M + 0.59% 0.19% 28 May 2020 Senior Bond 1,000 SEKm 1.25% EUR 1.01% 1.01% 28 May 2020 Debt Financing Senior Bond 500 EURm 1.50% --- 1.59% 16 September 2021 Senior Bond 700 SEKm 0.88% Euribor6M + 0.38% 0.04% 23 May 2022 Senior Bond 1,300 SEKm Stibor3M + 0.55% Euribor6M + 0.39% 0.05% 23 May 2022 Sampo plc’s debt financing on 31 December 2019 Senior Bond 750 EURm 1.000% --- 1.01% 18 September 2023 amounted to EUR 3,908 million (4,067) and interest Senior Bond 500 EURm 1.250% Euribor6M + 0.74% 0.39% 20 May 2025 ­bearing assets to EUR 1,725 million (1,959). Interest Senior Bond 500 EURm 1.625% 0.85% 21 February 2028 bearing assets include bank accounts, fixed income Senior Bond under separate documentation 1,000 NOKm 3.100% Euribor6M + 0.77% 0.34% 7 September 2028 instruments and EUR 359 million (489) of hybrid Hybrid Tier2 Bond 500 EURm 3.375% --- 3.48% 23 May 2029 capital and subordinated debt instruments issued by the Senior Bond 500 EURm 2.25% --- 1.49% 27 September 2030 ­subsidiaries and associated companies. Public debt, 3,830 EURm 1.3% Private placements 100 EURm 0.76% Total 3,930 EURm 1.2%

BOARD OF DIRECTORS’ REPORT 2019 29 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S REPORT DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

To balance the risks on the Group level Sampo plc’s debt flexibility to adjust theth derivative position if needed arrange financing for strategic projects if needed. Strong is mainly tied to short-term interest rates and issued in but this comes at the cost of increased volatility in the liquidity and the ability to acquire financing are essential euro or Swedish krona. Interest rate swaps are used to Holding segment’s net finance costs. factors in maintaining Sampo Group’s strategic flexibility. obtain the desired characteristics for the debt portfolio. These derivatives are valued at fair value in the profit and The underlying objective of Sampo plc is to maintain a loss account although economically they are related the well-diversified debt structure, relatively low leverage underlying bonds. As a result Sampo plc maintains the and strong liquidity in order for the company to be able to

BOARD OF DIRECTORS’ REPORT 2019 30 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S REPORT DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Outlook

Outlook for 2020 The Major Risks and Currently there are a number of widely identified macro-­ ­Uncertainties to the Group in economic, political and other sources of uncertainty Sampo Group’s business areas are expected to report good the Near-Term which can, in various ways, affect the financial services operating results for 2020. industry negatively. In particular the political risks are at In its current day-to-day business activities Sampo Group an elevated level at the moment. However, the marked-to-market results are, particularly is exposed to various risks and uncertainties mainly in life insurance, highly dependent on capital market through its separately managed major business units. Other sources of uncertainty are unforeseen structural developments. The continuing low interest rate level also changes in the business environment and already creates a challenging environment for reinvestment in Major risks affecting the Group companies’ profitability identified trends and potential wide-impact events. fixed income instruments. and its variation are market, credit, insurance and These external drivers may have long-term impacts on operational risks that are quantified independently by the how ­business shall be conducted. Examples of already If P&C is expected to reach a combined ratio of 85 – 89 per major business units. At the group level sources of risks ­identified trends are technological development in areas cent in 2020. are the same, but they are not directly additive because of such as artificial intelligence and digitalization, demo- diversification effects. graphic changes and sustainability issues that may have With regard to Topdanmark reference is made to the profit profound effects on financial sector companies as well. forecast model that the company publishes quarterly. Uncertainties in the form of major unforeseen events may have an immediate impact on the Group’s profitability. Nordea’s contribution to the Group’s profit is expected to Identification of unforeseen events is easier than estima- be significant. tion of their probabilities, timing and potential outcomes.

BOARD OF DIRECTORS’ REPORT 2019 31 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S REPORT DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Dividends

The New Dividend Policy Dividend Proposal No significant changes have taken place in the company’s financial position since the end of the financial year. The Sampo has for several years had the ambition of annually The parent company’s distributable capital and reserves company’s liquidity position is good and in the view of increasing its nominal dividend per share. On 24 October totalled EUR 7,383,547,646.18 of which profit for the the Board, the proposed distribution does not jeopardize 2019 Sampo management, however, concluded that in financial year was EUR 1,489,678,098.42. the company’s ability to fulfill its obligations. the present operating environment and with government bond yields expected to remain negative for some time to The Board proposes to the Annual General Meeting a SAMPO PLC come, an increase in the dividend would not best serve dividend of EUR 2.20 per share to company’s 555,351,850 Board of Directors the company or its shareholders. This view was further shares. The dividends to be paid are EUR 1,221,774,070.00 reinforced by a change in Nordea’s dividend policy in total. The remainder of funds are left in the equity announced earlier on the same day. capital.

Sampo plc’s Board of Directors has on 6 February 2020 The dividend will be paid to shareholders registered in the approved a new dividend policy according to which Register of Shareholders held by Euroclear Finland Ltd total annual dividends paid will be at least 70 per cent of as at the record date of 27 April 2020. The Board proposes Group's net profit for the year (excluding extraordinary that the dividend be paid on 5 May 2020. items). In addition share buy-backs can be used to complement the cash dividend.

BOARD OF DIRECTORS’ REPORT 2019 32 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S REPORT DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Key Figures

Group key figures 2019 2018 2017 2016 2015 Profit before taxes EURm 1,541 2,094 2,482 1,871 1,888 Return on equity (at fair values) % 12.0 7.5 17.1 15.0 14.0 Return on assets (at fair values) % 5.5 3.2 7.6 7.3 7.2 Equity/assets ratio % 23.0 25.1 26.1 31.5 32.1 Group solvency ¹) EURm 4,079 2,942 3,945 3,895 3,687 Group solvency ratio ¹) % 167 140 156 155 154 Average number of staff 9,813 9,509 9,364 6,780 6,755

If 2019 2018 2017 2016 2015 Premiums written before reinsurers' share EURm 4,675 4,502 4,525 4,458 4,559 Premiums earned EURm 4,388 4,290 4,293 4,286 4,344 Profit before taxes EURm 884 848 818 824 960 Return on equity (at fair values) % 34.5 11.2 21.3 25.3 21.5 Risk ratio ²) % 62.7 63.3 63.3 62.3 66.6 Cost ratio ²) % 21.8 21.9 22.0 22.1 18.8 Loss ratio ²) % 68.4 68.8 68.9 67.8 72.4 Expense ratio ²) % 16.1 16.4 16.4 16.6 13.0 Combined ratio % 84.5 85.2 85.3 84.4 85.4 Average number of staff 6,865 6,603 6,367 6,180 6,176

Topdanmark*) 2019 2018 2017 2016 2015 Premiums written before reinsurers' share, life insurance EURm 1,487 1,357 294 - - Premiums written before reinsurers' share, P&C insurance EURm 1,272 1,235 210 - - Premiums earned, P&C insurance EURm 1,178 1,144 281 - - Profit before taxes EURm 238 199 848 - - Loss ratio ²) % 66.2 66.0 64.0 - - Expense ratio ²) % 16.0 16.3 16.4 - - Combined ratio % 82.1 82.3 80.5 - - Average number of staff 2,322 2,314 2,412 - -

BOARD OF DIRECTORS’ REPORT 2019 33 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S REPORT DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Mandatum 2019 2018 2017 2016 2015 Premiums written before reinsurers' share EURm 1,603 1,082 967 1,122 1,149 Profit before taxes EURm 280 450 236 210 181 Return on equity (at fair values) % 23.5 8.7 13.3 15.9 12.7 Expense ratio % 98.7 92.1 94.7 100.5 100.0 Average number of staff 563 531 525 543 522

Holding 2019 2018 2017 2016 2015 Profit before taxes EURm 139 618 576 778 749 Average number of staff 63 61 60 57 57

Per share key figures 2019 2018 2017 2016 2015 Earnings per share EUR 2.04 3.04 3.96 2.95 2.96 Earnings per share, incl. items in other comprehensive income EUR 2.63 1.70 3.79 3.14 2.79 Equity per share EUR 21.44 22.30 23.14 21.31 20.38 Net asset value per share EUR 20.71 20.60 25.37 24.86 23.79 Dividend per share ³) EUR 2.20 2.85 2.60 2.30 2.15 Dividend per earnings % 107.8 93.8 65.7 78.0 72.6 Effective dividend yield % 5.7 7.4 5.7 5.4 4.6 Price/earnings ratio 19.1 12.6 11.6 14.4 15.9 Adjusted number of shares at 31 Dec 1,000 555,352 555,352 555,352 560,000 560,000 Average adjusted number of shares 1,000 555,352 555,352 559,873 560,000 560,000 Weighted average number of shares, incl. dilutive potential shares 1,000 555,352 555,352 559,873 560,000 560,000 Market capitalisation EURm 21,609 21,331 24,858 23,850 26,320

BOARD OF DIRECTORS’ REPORT 2019 34 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S REPORT DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

A shares 2019 2018 2017 2016 2015 Adjusted number of shares at 31 Dec 1,000 554,152 554,152 554,152 558,800 558,800 Average adjusted number of shares 1,000 554,152 554,152 554,152 558,800 558,800 Weighted average number of shares, incl. dilutive potential shares 1,000 554,152 554,152 554,152 558,800 558,800 Weighted average share price EUR 39.15 43.11 44.76 40.35 44.34 Adjusted share price, high EUR 43.38 48.92 47.4 6 46.56 49.40 Adjusted share price, low EUR 34.45 37.61 41.53 34.42 37.72 Adjusted closing price EUR 38.91 38.41 45.80 42.59 47.0 0 Share trading volume during the financial year 1,000 250,282 239,051 179,568 203,996 182,762 Relative share trading volume % 45.2 43.1 32.4 36.5 32.7

B shares 2019 2018 2017 2016 2015 Adjusted number of shares at 31 Dec 1,000 1,200 1,200 1,200 1,200 1,200 Average adjusted number of shares 1,000 1,200 1,200 1,200 1,200 1,200

*) In the comparison year 2017 Topdanmark was consolidated as an associate between January - September 2017. The key figures are from October - December 2017 when the company was first consolidated as a subsidiary. 1) From 2016 on, the group solvency for Sampo has been calculated according to the consolidation method defined in the Solvency II Directive (2009/138/EC) and the Finnish Insurance Companies Act (521/2008). As Sampo plc is the ultimate parent of the Solvency II group, the solvency is calculated at the group level. 2) Key figures for P&C insurance are based on activity based costs and cannot, therefore, be calculated directly from the consolidated income statement. 3) The Board of Director's proposal to the Annual General Meeting for the accounting period 2019.

In calculating the key figures the tax corresponding to the result for the accounting period has been taken into account. The valuation differences, adjusted with the deferred tax liability, on the investment property have been taken into account in return on assets, return on equity, equity/assets ratio and net asset value per share. Additionally, the items in the other comprehensive income have been taken into account in return on assets and return on equity. In the net asset value per share, the Group valuation difference on associate Nordea and listed subsidiary Topdanmark have also been taken into account.

BOARD OF DIRECTORS’ REPORT 2019 35 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S REPORT DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Calculation of the Key Figures

The key figures have been calculated in accordance with the decree issued by the Ministry of Finance and the specifying regulations and instructions of the Financial Supervisory Authority. The Group solvency has been calculated according to the consolidation method defined in Chapter 3 of the Act on the Supervision of Financial and Insurance Conglomerates.

Group Key Figures Return on equity (at fair values), % Equity/assets ratio (at fair values), % + total comprehensive income attributable to + total equity Profit before taxes parent company equity holders (attributable to parent company’s equity holders) ± change in valuation differences on investments ± valuation differences on investments less Property & casualty insurance profit before taxes less deferred tax deferred tax + life insurance profit before taxes X 100% X 100% + total equity attributable to parent company + balance sheet total + holding business profit before taxes equity holders ± Group elimination items with result impact ± valuation differences on investments (average of values on 1 Jan. and 31 Dec.) ± valuation differences on investments less Property & casualty and life insurance deferred tax (average of values on 1 Jan. and 31 Dec.) Average number of staff + insurance premiums written + net income from investments Average of month-end figures, adjusted for part-time staff + other operating income Return on assets (at fair values), % - claims incurred - change in liabilities for investment + operating profit and insurance contracts - staff costs ± other comprehensive income before taxes - other operating expenses - profit attributable to non-controlling interests - finance costs + interest and other financial expense +/- share of associates’ profit/loss + calculated interest on technical provisions ± change in valuation differences on investments X 100% Holding + total balance sheet + net income from investments (average of values on 1 Jan. and 31 Dec.) + other operating income - staff costs - technical provisions relating to unit-linked - other operating expenses insurance - finance costs (average of values on 1 Jan. and 31 Dec.) +/- share of associates’ profit/loss ± valuation differences on investments (average of values on 1 Jan. and 31 Dec.)

BOARD OF DIRECTORS’ REPORT 2019 36 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S REPORT DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Property & Casualty Life Insurance Key Figures Insurance Key Figures Dividend per share, % dividend for the accounting period X 100% Expense ratio adjusted number of shares at balance sheet date Risk ratio, % + operating expenses before change in deferred acquisition costs + claims incurred + claims settlement expenses Dividend per earnings, % – claims settlement expenses X 100% dividend per share X 100% expense charges X 100% premiums earned earnings per share Per Share Key Figures Cost ratio, % Effective dividend yield, % + operating expenses dividend per share Earnings per share X 100% + claims settlement expenses adjusted closing share price at balance sheet date X 100% profit for the financial period attributable to the parent premiums earned company’s equity holders adjusted average number of shares Price/earnings ratio Loss ratio excl. adjusted closing share price at balance sheet date unwinding of discount, % Earnings per share, incl. change earnings per share claims incurred before unwinding of discount X 100% in fair value reserve premiums earned total comprehensive income for the financial period Market capitalisation attributable to the parent company’s equity holders number of shares at balance sheet date adjusted average number of shares x closing share price at balance sheet date Expense ratio, % operating expenses X 100% premiums earned Equity per share Relative share trading volume, % equity attributable to the parent company ‘s equity holders number of shares traded through the Helsinki Exchanges adjusted number of shares at balance sheet date X 100% Combined ratio excl. adjusted average number of shares unwinding of discount, % Loss ratio before unwinding of discount + expense ratio Net asset value per share + equity attributable to the parent company’s equity holders ± valuation differences on listed associate in the Group ± valuation differences on investments less deferred tax X 100% adjusted number of shares at balance sheet date

BOARD OF DIRECTORS’ REPORT 2019 37 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

GROUP’S IFRS FINANCIAL STATEMENTS 39 40 41 42 Statement of Profit and Consolidated Balance Statement of Statement of Other Comprehensive Sheet, IFRS Changes in Equity, Cash Flows, Income, IFRS IFRS IFRS

FINANCIAL STATEMENTS 2019 38 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Group's IFRS Financial Statements Statement of Profit and Other Comprehensive Income, IFRS

EURm Note 1–12/2019 1–12/2018 EURm Note 1–12/2019 1–12/2018

Insurance premiums written 1 8,749 7,907 Other comprehensive income for the period Net income from investments 2, 9 2,515 -104 Other operating income 36 60 244 Items reclassifiable to profit or loss 23, 24 Exchange differences -39 -97 Claims incurred 3 -5,466 -5,015 Available-for-sale financial assets 566 -739 Change in liabilities for insurance and investment Share of associate's other comprehensive income -30 -61 contracts 4 -2,919 -85 Taxes -123 159 Staff costs 5 -897 -855 Total items reclassifiable to profit or loss, net of tax 373 -739 Other operating expenses 6 -653 -627

Items not reclassifiable to profit or loss Finance costs 9 -13 -18 Actuarial gains and losses from defined pension plans -58 -6 Share of associates' profit/loss 13 321 647 Taxes 13 1 - Valuation loss on dividend distribution Total items not reclassifiable to profit or loss, of associate shares 13 -155 - net of tax -45 -5

Profit before taxes 1,541 2,094 TOTAL COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR 1,565 1,034 Taxes 21, 22, 23 -304 -317 Profit attributable to Profit for the period 1,237 1,778 Owners of the parent 1,130 1,687 Non-controlling interests 107 91

Total comprehensive income attributable to Owners of the parent 1,458 943 Non-controlling interests 107 91

Earnings per share (EUR) 8 2.04 3.04

FINANCIAL STATEMENTS 2019 39 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Consolidated Balance Sheet, IFRS

EURm Note 12/2019 12/2018 EURm Note 12/2019 12/2018

Assets Equity Property, plant and equipment 10 302 162 Share capital 98 98 Investment property 11 679 665 Reserves 1,530 1,530 Intangible assets 12 2,151 2,143 Retained earnings 10,062 10,944 Investments in associates 13 7,217 8,065 Other components of equity 217 -186 Financial assets 9, 14, 15, 16, 17, 18, 19 23,443 22,693 Equity attributable to owners of the parent 11,908 12,386 Investments related to unit-linked insurance Non-controlling interests 635 628 contracts 20 12,975 10,671 Total equity 12,542 13,014 Tax assets 21 19 24

Reinsurers' share of insurance liabilities 26 289 294 Total equity and liabilities 51,939 49,340 Other assets 25 2,185 2,263 Cash and cash equivalents 2,677 2,361 Total assets 51,939 49,340

Liabilities Liabilities for insurance and investment contracts 26 18,041 18,415 Liabilities for unit-linked insurance and investment contracts 27 14,368 11,390 Subordinated debt 9, 15, 17, 28 1,202 464 Other financial liabilities 9, 15, 17, 28 3,592 4,247 Tax liabilities 21 587 487 Provisions 29 20 18 Employee benefits 30 99 51 Other liabilities 31 1,489 1,254 Total liabilities 39,396 36,326

FINANCIAL STATEMENTS 2019 40 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Statement of Changes in Equity, IFRS

Available Invested Translation for sale Non- Share Legal unrestricted Retained of foreign financial controlling EURm capital reserve equity earnings 1) operations 2) assets 3) Total interests Total

Equity at 1 January 2018 98 4 1,527 10,692 -656 1,184 12,848 660 13,508

Changes in equity Dividends -1,4444) -1,444 -112 -1,556 Share-based payments 8 8 9 17 Share of associate's other changes in equity 31 31 31 Other changes in equity - -20 -20 Profit for the period 1,687 1,687 91 1,778 Other comprehensive income for the period -31 -124 -590 -744 -744

Equity at 31 December 2018 98 4 1,527 10,944 -780 594 12,386 628 13,014

Changes in equity Dividends -1,583 4) -1,583 -90 -1,672 Extra dividend in Nordea shares -319 -319 -319 Share-based payments 1 1 1 Share of associate's other changes in equity -43 -43 -43 Other changes in equity 8 8 -10 Profit for the period 1,130 1,130 107 1,237 Other comprehensive income for the period -75 -37 440 328 328

Equity at 31 December 2019 98 4 1,527 10,062 -817 1,034 11,908 635 12,542

1) IAS 19 Pension benefits had a net effect of EURm -90 (-34) on retained earnings. 2) The total comprehensive income includes also the share of the associate Nordea's other comprehensive income, in accordance with the Group's share holding. The retained earnings thus include EURm -30 (-26) of Nordea's actuarial gains/losses The exchange differences include the share of Nordea's exchange differences EURm 3 (-26). Respectively, available-for-sale financial assets include EURm -3 (-10) of Nordea's valuation differences on assets at fair value through p/l. Nordea adopted the new IFRS 9 Financial instruments standard from 1 January 2018 on. 3) The amount recognised in equity from available-for-sale financial assets for the period totalled EURm 718 (-409). The amount transferred to p/l amounted to EURm -255 (-192). EURm -21 (20) was transferred to the Segregated Suomi portfolio. 4) Dividend per share 2.20 (2.85) euro.

The amount included in the translation and available-for-sale reserves represent other comprehensive income for each component, net of tax.

FINANCIAL STATEMENTS 2019 41 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Statement of Cash Flows, IFRS

EURm 2019 2018 EURm 2019 2018

Operating activities Financing activities Profit before taxes 1,541 2,094 Dividends paid -1,588 -1,444 Adjustments: Issue of debt securities 496 1,482 Depreciation and amortisation 78 59 Repayments of debt securities in issue -647 -609 Unrealised gains and losses arising from valuation -637 374 Net cash used in financing activities -1,739 -571 Realised gains and losses on investments -500 -280 Change in liabilities for insurance and investment contracts 2,775 35 Total cash flows 322 -355 Other adjustments 66 -665 Adjustments total 1,783 -478 Cash and cash equivalents at 1 January 2,361 2,734 Effects of exchange rate changes -5 -18 Change (+/-) in assets of operating activities Cash and cash equivalents at 31 December 2,677 2,361 Investments *) -1,526 -1,193 Net increase in cash and cash equivalents 322 -355 Other assets 37 -359 Total -1,489 -1,552 Additional information to the cash flow statement: 2019 2018 Interest income received 543 474 Change (+/-) in liabilities of operating activities Interest expense paid -189 -126 Financial liabilities -2 85 Dividend income received 216 183 Other liabilities 88 41 Paid taxes -390 -381 Total out-going cashflows from leases -34 - Total -305 -255

*) Investments include investment property, financial assets and investments related to unit-linked Net cash from operating activities 1,530 -190 insurance contracts.

Investing activities The items of the statement of cash flows cannot be directly concluded from the balance sheets Investments in group and associated undertakings 594 439 due to e.g. exchange rate differences, and acquisitions and disposals of subsidiaries during the period. Net investment in equipment and intangible assets -64 -33 Net cash from investing activities 530 406 Cash and cash equivalents include cash at bank and in hand EURm 2,662 (2,361) and short-term deposits (max 3 months) EURm 15 (-).

FINANCIAL STATEMENTS 2019 42 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

GROUP'S NOTES TO THE ACCOUNTS 44 62 67 68 Summary of Segment Material Business Significant Accounting Information Partly-Owned Acquisitions Policies Subsidiairies 69 Group’s Other Notes to the Accounts

1 Insurance premiums written...... 69 16 Change in fair values of financial assets...... 85 27 Liabilities from unit-linked insurance 2 Net income from investments...... 69 17 Determination and hierarchy of fair values...... 86 and investment contracts...... 103 3 Claims incurred...... 73 18 Movements in level 3 financial instruments 28 Financial liabilities...... 104 4 Change in liabilities for insurance measured at fair value ...... 90 29 Provisions...... 106 and investment contracts...... 73 19 Sensitivity analysis of level 3 30 Employee benefits...... 107 5 Staff costs...... 73 financial instruments measured at...... fair92 value 31 Other liabilities...... 110 6 Other operating expenses...... 74 20 Investments related to unit-linked 32 Contingent liabilities and commitments...... 111 insurance contracts...... 92 7 Result analysis of If...... 74 33 Equity and reserves...... 112 21 Deferred tax assets and liabilities...... 93 8 Earnings per share...... 74 34 Related party disclosures...... 113 22 Taxes...... 95 9 Financial assets and liabilities...... 75 35 Incentive schemes...... 114 23 Components of other comprehensive income....95 10 Property, plant and equipment ...... 76 36 Auditors’ fees...... 117 24 Tax effects relating to components 11 Investment property...... 77 of other comprehensive ...... income. 96 37 Legal proceedings...... 117 12 Intangible assets...... 78 25 Other assets...... 96 38 Investments in subsidiaries...... 117 13 Investments in associates ...... 80 26 Liabilities from insurance 39 Events after the balance sheet date...... 117 14 Financial assets...... 82 and investment contracts...... 97 40 Risk Management Disclosure 2019...... 118 15 Fair values...... 84

FINANCIAL STATEMENTS 2019 43 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Group’s Notes to the Accounts

Summary of Significant Accounting Policies

Sampo Group has prepared the consolidated financial During the financial year, other adopted standards or Consolidation statements for 2019 in compliance with the International annual improvements to the standards had no material Financial Reporting Standards (IFRSs). In preparing the impact on the Group’s financial statements reporting. financial statements, Sampo has applied all the standards Subsidiaries and interpretations relating to its business, adopted by the In preparing the notes to the consolidated financial commission of the EU and effective at 31 December, 2019. statements, attention has also been paid to the Finnish The consolidated financial statements combine the accounting and company legislation and applicable financial statements of Sampo plc and all its subsidiaries. From January 2019 on, Sampo has applied the new regulatory requirements. Entities qualify as subsidiaries if the Group has the standard IFRS 16 Leases. The standard superseded IAS 17 controlling power. The Group exercises control if its according to which leases were recognised either in the The financial statements have for the most part been shareholding is more than 50 per cent of the voting rights balance sheet as finance leases, or as other leases in which prepared under the historical cost convention. Exceptions or it otherwise has the power to exercise control over the case the related liability was disclosed in the notes. The are i.e. financial assets and liabilities at fair value through financial and operating policies of the entity. Subsidiaries new standard requires all the leases, apart from low-value p/l, financial assets available-for-sale, hedged items in fair are consolidated from the date on which control is trans- and short-term leases, to be recognised in the balance value hedges and share-based payments settled in equity ferred to the Group, and cease to be consolidated from the sheet. The related interest expenses and amortisations are instruments measured at fair value. date that control ceases. recognised in the income statement. The consolidated financial statements are presented The acquisition method of accounting is used for the In the transition, the modified retrospective approach in euro (EUR), rounded to the nearest million, unless ­purchase of subsidiaries. The cost of an acquisition was applied meaning that the comparison years were not otherwise stated. is ­allocated to the identifiable assets, liabilities and restated. In addition, the Group applied the exemption, ­contingent liabilities, which are measured at the fair value allowed by the standard, of not recognising short-term The Board of Directors of Sampo plc accepted the of the date of the acquisition. Possible non-controlling leases and leases of low-value assets in the balance sheet. financial statements for issue on 6 February 2020. interest of the acquired entity is measured either at fair The adoption of the standard had no material impact on value or at proportionate interest in the acquiree’s net the Group's financial result. The Group's assets increased assets. The acquisition-specific choice affects both the by 141 million euro and liabilities by 137 million euro. amount of recognised goodwill and non-controlling interest. The excess of the aggregate of consideration

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­transferred, non-controlling interest and possibly ­associate. If the Group’s share of the associate’s loss Foreign currency translation previously held equity interest in the acquiree, over the exceeds the carrying amount of the investment, the Group’s share of the fair value of the identifiable net assets investment is carried at zero value, and the loss in excess The consolidated financial statements are presented in acquired, is recognised as goodwill. is consolidated only if the Group is committed to fulfilling euro, which is the functional and reporting currency of the obligations of the associate. Goodwill arising on the the Group and the parent company. Items included in The accounting policies used throughout the Group for acquisition is included in the cost of the investment. the financial statements of each of the Group entities the purposes of consolidation are consistent with respect Unrealised gains (losses) on transactions are eliminated to are measured using their functional currency, being the to similar business activities and other events taking place the extent of the Group’s interest in the entity. currency of the primary economic environment in which in similar conditions. All intra-group transactions and the entity operates. Foreign currency transactions are balances are eliminated upon consolidation. The share of associates’ profit or loss, equivalent to the translated into the appropriate functional currency using Group’s holding, is presented as a separate line in the the exchange rates prevailing at the dates of transactions income statement. The Group’s share of associate’s or the average rate for a month. The balance sheet items Associates changes in other comprehensive income is presented in denominated in foreign currencies are translated into the the Group’s other comprehensive income items. functional currency at the rate prevailing at the balance Associates are entities in which the Group has significant sheet date. influence, but no control over the financial management If there is any indication that the value of the investment and operating policy decisions. Unless otherwise may be impaired, the carrying amount is tested by com- Exchange differences arising from translation of trans- ­demonstrated, this is generally presumed when the Group paring it with its recoverable amount. The ­recoverable actions and monetary balance sheet items denominated holds in excess of 20 per cent, but no more than 50 per amount is the higher of its value in use or its fair value in foreign currencies into functional currency are cent, of the voting rights of an entity. Investments in less costs to sell. If the recoverable amount is less than its recognised as translation gains and losses in profit or loss. associates are treated by the equity method of accounting, carrying amount, the carrying amount is reduced to its Exchange differences arising from equities classified as in which the investment is initially recorded at cost recoverable amount by recognising an impairment loss in available-for-sale financial assets are included directly in and increased (or decreased) each year by the Group’s the profit/loss. If the recoverable amount later increases the fair value reserve in equity. share of the post-acquisition net income (or loss), or and is greater than the carrying amount, the impairment other ­movements reflected directly in the equity of the loss is reversed through profit and loss.

FINANCIAL STATEMENTS 2019 45 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

The income statements of Group entities whose is organised in accordance with the business segments. Fees and commissions functional currency is other than euro are translated into The Group’s business segments are If, Topdanmark, euro at the average rate for the period, and the balance ­Mandatum and Holding (including Nordea). The fees and transaction costs of financial instruments sheets at the rates prevailing at the balance sheet date. measured at fair value through profit or loss are The resulting exchange differences are included in equity Geographical information has been given on income from ­recognised in profit or loss when the instrument is and their change in other comprehensive income. When a external customers and non-current assets. The reported initially recognised. subsidiary is divested entirely or partially, the ­cumulative segments are Finland, Sweden, Norway, Denmark and the exchange differences are included in the income Baltic countries. The costs of acquiring new and renewed insurance ­statement under sales gains or losses. ­business are treated as deferred acquisition costs in In the inter-segment and inter-company pricing, for both the P&C insurance. In the life insurance business, the Goodwill and fair value adjustments arising on the domestic and cross border transactions, market-based acquisition costs are treated as fee and commission acquisition of a foreign entity are treated as if they were prices are applied. The pricing is based on the Code of expense under ‘Other operating expenses’. assets and liabilities of the foreign entity. Exchange conduct on Transfer Pricing Documentation in the EU differences resulting from the translation of these items at and OECD guidelines. Other fees and commissions paid for investment activities the exchange rate of the balance sheet date are included in are included in ‘Net income from investments’. equity and their change in other comprehensive income. Inter-segment transactions, assets and liabilities are eliminated in the consolidated financial statements on a The following exchange rates were applied in the line-by-line basis. Insurance premiums ­consolidated financial statements: Insurance premiums in the income statement consist of Balance sheet Average premiums written for P&C insurance and life insurance. 1 euro (EUR) = date exchange­ rate Interest and dividends Swedish krona (SEK) 10.4468 10.5853 Danish krona (DKK) 7.471 5 7.4 661 Interest income and expenses are recognised in the P&C insurance contracts are primarily of short duration, so income statement using the effective interest rate that premiums written are recognised as earned on a pro method. This method recognises income and expenses rata basis, adjusting them by a change in the provision for Segment reporting on the instrument evenly in proportion to the amount unearned premiums i.e. by the proportion of the insurance outstanding over the period to maturity. Dividends on premium income that, based on the period covered by the The Group’s segmentation is based on business areas equity securities are recognised as revenue when the right insurance contract, belongs to the following financial year. whose risks and performance bases as well as regulatory to receive payment is established. environment differ from each other. The control and In the life insurance business, liabilities arising from management of business and management reporting insurance and investment contracts count as long-term

FINANCIAL STATEMENTS 2019 46 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

liabilities. Therefore, the insurance premium and related ­published price quotations or valuation techniques based companies, the multiple based valuation or the cashflows claims are usually not recognised in the same accounting on market observable inputs, where available. For a of the underlying investments. Most private equity funds period. Depending on the type of insurance, premiums limited amount of assets the value needs to be ­determined follow the International Private Equity and Venture are primarily recognised in premiums written when the using other techniques. The financial instruments Capital (IPEV) guidelines which give detailed instructions premium has been paid. In group pension insurance, a part ­measured at fair value have been classified into three on the valuation of private equity funds. of the premiums is recognised already when charged. hierarchy levels in the notes, depending on e.g. if the market for the instrument is active, or if the inputs used For alternative funds the valuation is also conducted The change in the provision for unearned premiums is in the valuation technique are observable. by the fund managers. Alternative funds often have presented as an expense under 'Change in insurance and complicated structures and the valuation is dependent investment contract liabilities'. On level 1, the measurement of the instrument is based on the nature of the underlying investments. There are on quoted prices in active markets for identical assets or many different valuation methods that can be used, liabilities. for ­example, the method based on the cashflows of the Financial assets and liabilities underlying investments. The operations and valuation On level 2, inputs for the measurement of the instrument of alternative funds are regulated for example by the Based on the measurement practice, financial assets include also other than quoted prices observable for the ­Alternative Investment Fund Managers Directive and liabilities are classified in the following categories asset or liability, either directly or indirectly by using (AIFMD), which determines the principles and documen- upon the initial recognition: financial assets at fair valuation techniques. tation requirements of the valuation process. value through profit or loss, loans and receivables, ­available-for-sale financial assets, financial liabilities at On level 3, the measurement is based on other inputs In the life insurance business, IFRS 4 Insurance Contracts fair value through profit or loss, and other liabilities. rather than observable market data. The majority of provides that insurance contracts with a discretionary Sampo Group’s level 3 assets are private equity and participation feature are measured in accordance According to the Group’s risk management policy, invest- alternative funds. with national valuation principles rather than at fair ments are managed at fair value in order to have the most value. These contracts and investments made to cover realistic and real-time picture of investments, and they For private equity funds the valuation of the underlying ­shareholders’ equity are managed in their entirety and are are reported to the Group key management at fair value. investments is conducted by the fund manager who has classified mainly as available-for-sale financial assets. An Investments comprise debt and equity securities. They all the relevant information required in the valuation exception to the rule are investments related to unit-linked are mainly classified as financial assets available-for-sale process. The valuation is usually updated quarterly based insurance, valued at fair value thru p/l and shown as a or at fair value through p/l. on the value of the underlying assets and the amount of separate line item in the balance sheet. The corresponding debt in the fund. There are several valuation methods, liability is also shown as a separate line item. A large majority of Sampo Group's financial assets are which can be based on, for example, the acquisition value valued at fair value. The valuation is based on either of the investments, the value of publicly traded peer

FINANCIAL STATEMENTS 2019 47 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Recognition and derecognition Financial assets held for trading Loans and receivables Financial asset that is held for the purpose of selling or Purchases and sales of financial assets at fair value buying in the short term, or belongs to a portfolio that is Loans and receivables comprise non-derivative financial through profit or loss and available-for-sale financial managed together or is repeatedly used for short-term assets with fixed or determinable payments that are assets are recognised and derecognised on the trade profit taking, is classified as an asset held for trading. not quoted in an active market and that the Group does date, which is the date on which the Group commits Gains and losses arising from changes in fair value, or not intend to sell immediately or in the short term. The to purchase or sell the asset. Loans and receivables are realised on disposal, together with related interest income category also comprises cash and balances with banks. recognised when cash is advanced. and dividend, are recognised in the income statement. Loans and receivables are initially recognised at their fair Financial assets and liabilities are offset and the net Also derivative instruments that are not designated as value, added by transaction costs directly attributable amount is presented in the balance sheet only when the hedges and do not meet the requirements for hedge to the acquisition of the asset. Loans and receivables Group has a legally enforceable right to set off the recog- accounting are classified as financial assets for trading are subsequently measured at amortised cost using the nised amounts and it intends to settle on a net basis, or to purposes. effective interest rate method. realise the asset and settle the liability simultaneously. Financial derivatives held for trading are initially recog­ Financial assets are derecognised when the contractual nised at fair value. Derivative instruments are carried Available-for-sale financial assets rights to receive cash flows have expired or the Group as assets when the fair value is positive and as liabilities has transferred substantially all the risks and rewards of when the fair value is negative. Derivative instruments are Available-for-sale financial assets are non-derivative ownership. Financial liabilities are derecognised when recognised at fair value, and gains and losses arising from financial investments that are designated as available for the obligation specified in the contract is discharged or changes in fair value together with realised gains and sale and or are not categorised into any other category. cancelled or expired. losses are recognised in the income statement. Available-for-sale financial assets comprise debt and equity securities. Financial assets designated as at fair value Financial assets and financial liabilities through profit or loss Available-for-sale financial assets are initially recognised at fair value through profit or loss Financial assets designated as at fair value through profit fair value, including direct and incremental transaction or loss are assets which, at inception, are irrevocably costs. They are subsequently remeasured at fair value, In Sampo Group, financial assets and liabilities at fair designated as such. They are initially recognised at their and the changes in fair value are recorded in other value through profit of loss comprise financial assets held fair value. They are recognised in the income statement comprehensive income and presented in the fair value for trading and financial assets designated as at fair value and balance sheet accordingly with above-explained reserve, taking the tax effect into account. Interest income through profit or loss. assets held for trading. and dividends are recognised in profit or loss. When the

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available-for-sale assets are sold, the cumulative change Fair value Impairment of financial assets in the fair value is transferred from equity and recognised together with realised gains or losses in profit or loss. The The fair value of financial instruments is determined Sampo assesses at the end of each reporting period cumulative change in the fair value is also transferred primarily by using quoted prices in active markets. whether there is any objective evidence that a financial to profit or loss when the assets are impaired and the Instruments are measured either at the bid price or at asset, other than those at fair value through p/l, may be impairment loss is recognised. Exchange differences due the last trade price, if there is an auction policy in the impaired. A financial asset is impaired and impairment to available-for-sale monetary balance sheet items are stock market of the price source. The financial derivatives losses are incurred, if there is objective evidence of always recognised directly in profit or loss. are also measured at the last trade price. If the financial impairment as a result of one or more loss events that instrument has a counter-item that will offset its market occurred after the initial recognition of the asset, and if risk, the same price source is used in assets and liabilities that event has an impact, that can be reliably estimated, Other financial liabilities to that extent. If a published price quotation does not on the estimated future cash flows of the financial asset. exist for a financial instrument in its entirety, but active Other financial liabilities comprise debt securities in issue markets exist for its component parts, the fair value is and other financial liabilities. determined on the basis of the relevant market prices of Financial assets carried at amortised cost the component parts. Other financial liabilities are recognised when the There is objective evidence of impairment, if an issuer or consideration is received and measured to amortised cost, If a market for a financial instrument is not active, or the debtor e.g. encounters significant financial difficulties using the effective interest rate method. instrument is not quoted, the fair value is established by that will lead to insolvency and to estimation that the using generally accepted valuation techniques including customer will probably not be able to meet the obligations If debt securities issued are redeemed before maturity, recent arm’s length market transactions between to the Group. Objective evidence is first assessed for they are derecognised and the difference between knowledgeable, willing parties, reference to the current financial assets that are individually significant, and the ­carrying amount and the consideration paid at fair value of another instrument that is substantially the individually and collectively for financial assets not ­redemption is recognised in profit or loss. same, discounted cash flow analysis and option pricing individually significant. models. When there is objective evidence of impairment of a If the fair value of a financial asset cannot be determined, financial asset carried at amortised cost, the amount historical cost is deemed to be a sufficient approximation of the loss is measured as the difference between the of fair value. The amount of such assets in the Group ­receivable’s carrying amount and the present value of balance sheet is immaterial. estimated future cash flows discounted at the ­receivable’s original effective interest rate. The difference is

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recognised as an impairment loss in profit or loss. The prolonged, when the fair value has been lower than the value and the carrying amount are booked to zero. An impairment is assessed individually. acquisition cost for over 12 months. impairment is only performed to those funds for which the benchmarks are met in all Sampo Group companies’ If, in a subsequent period, the amount of the impairment As there are no quoted prices available in active portfolios. loss decreases, and the decease can objectively be markets for unquoted equities and participations, the related to an event occurring after the impairment aim is to determine their fair value with the help of In the case of debt securities, the amount of the was ­recognised (e.g. the default status is removed), the generally accepted valuation techniques available in impairment loss is assessed as the difference between the previously recognised impairment loss shall be reversed the markets. The most significant share of unquoted acquisition cost, adjusted with capital amortisations and through profit or loss. equities and participations comprise the private equity accruals, and the fair value at the review time, reduced by and venture capital investments. They are measured previously in profit or loss recognised impairment losses. in accordance with the generally accepted common Available-for-sale financial assets practice, ­International Private Equity and Venture Capital When assessed that there is objective evidence of Guidelines (IPEV). ­impairment in debt or equity securities classified as Whether there is objective evidence of an impairment financial assets available-for-sale, the cumulative loss of available-for-sale financial assets, is evaluated in a The significance and prolongation of the impairment in recognised in other comprehensive income is transferred separate assessment, which is done if the credit rating the last-mentioned cases is assessed case by case, taking from equity and recognised in profit or loss as an of an issuer has declined or the entity is placed on watch into consideration special factors and circumstances ­impairment loss. list, or there is a significant or prolonged decline in the related to the investment. Sampo invests in private equity fair value of an equity instrument below its original and venture capital in order to keep them to the end of If, in a subsequent period, the fair value of a debt security acquisition cost. their life cycle, so the typical lifetime is 10 – 12 years. In increases and the increase can objectively be related to an general, a justifiable assessment of a potential impair- event occurring after the impairment loss was recognised The decision on whether the impairment is significant or ment may only be done towards the end of the life cycle. in profit or loss, the impairment loss shall be reversed by prolonged requires an assessment of the management. However, if additionally there is a well-founded reason recognising the amount in profit or loss. The assessment is done case by case and with considera- to believe that an amount equivalent to the acquisition tion paid not only to qualitative criteria but also historical cost will not be recovered when selling the investment, an If the fair value of an equity security increases after the changes in the value of an equity as well as time period impairment loss is recognised. impairment loss was recognised in profit or loss, the during which the fair value of an equity security has increase shall be recognised in other comprehensive been lower than the acquisition cost. In Sampo Group, An impairment on equity funds is recognised in line with income. If the value keeps decreasing below the the impairment is normally assessed to be significant, if the principles above when the starting year of the fund is ­acquisition cost, an impairment loss is recognised the fair value of a listed equity or participation decreases at least 10 years old and the carrying amount of the fund through profit or loss. below the average acquisition cost by 20 per cent and is maximum EUR 500,000. In these cases both the fair

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Derivative financial instruments Hedge accounting swaps, interest rate and cross currency swaps and options, and hedge accounting approved by the managements of the Group companies. Sampo Group may hedge its operations against interest Derivative financial instruments are classified as those rate risks, currency risks and price risks through fair value Changes in the fair value of derivative instruments that held for trading and those held for hedging, including hedging and cash flow hedging. Cash flow hedging is used are documented as fair value hedges and are effective in interest rate derivatives, credit risk derivatives, foreign as a protection against the variability of the future cash relation to the hedged risk are recognised in profit or loss. exchange derivatives, equity derivatives and commodity flows, while fair value hedging is used to protect against In addition, the hedged assets and liabilities are measured derivatives. Derivative instruments are measured initially changes in the fair value of recognised assets or liabilities. at fair value during the period for which the hedge was at fair value. All derivatives are carried as assets when During the financial year, the fair value hedging has been designated, with changes in fair value recognised in profit fair value is positive and as liabilities when fair value is applied in Mandatum. or loss. negative. Hedge accounting applies to hedges that are effective in relation to the hedged risk and meet the hedge accounting Securities lending Derivatives held for trading requirements of IAS 39. The hedging relationship between the hedging instrument and the hedged item, Securities lent to counterparties are retained in the Derivative instruments that are not designated as hedges as well as the risk management objective and strategy for balance sheet. Conversely, securities borrowed are not and embedded derivatives separated from a host contract undertaking the hedge, are documented at the inception recognised in the balance sheet, unless these are sold to are treated as held for trading. They are measured at fair of the hedge. In addition, the effectiveness of a hedge is third parties, in which case the purchase is recorded as a value and the change in fair value, together with realised assessed both at inception and on an ongoing basis, to trading asset and the obligation to return the securities as gains and losses and interest income and expenses, is ensure that it is highly effective throughout the period a trading liability at fair value through profit or loss recognised in profit or loss. for which it was designated. Hedges are regarded as highly effective in offsetting changes in fair value or the If derivatives are used for hedging, but they do not qualify cash flows ­attributable to a hedged risk within a range of Leases for hedge accounting as required by IAS 39, they are 80–125 per cent. treated as held for trading. Fair value hedging Group as lessee In accordance with the Group’s risk management principles, fair value hedging is used to hedge changes All lease contracts are primarily recognised in the balance in fair values resulting from changes in price, interest sheet in accordance with the new IFRS 16 Leases. The rate or exchange rate levels. The hedging instruments only optional excemptions include certain short-term or used include foreign exchange forwards, interest rate low-value contracts for which the lease payments can be

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recognised as an expense on a straight-line basis over the Intangible assets improvement of existing software are recognised only to lease term. the extent they meet the above-mentioned requirements for being recognised as assets in the balance sheet. Right-of-use assets related to lease contracts (right to Goodwill use an underlying asset) are recognised in the asset Intangible assets with finite useful lives are measured side as part of Property, Plant and Equipment and the Goodwill represents the excess of the cost of an acquisi- at historical cost less accumulated amortisation and corresponding lease liabilities in the liability side as part tion (made after 1 January 2004) over the fair value of the impairment losses. Intangible assets are amortised on of Other liabilities. Right-of-use asset is recognised at Group’s share of the net identifiable assets, liabilities and a straight-line basis over the estimated useful life of the the commencement date of the lease and measured at contingent liabilities of the acquired entity at the date of asset. The estimated useful lives by asset class are as cost that includes the amount of the initial measurement acquisition. Goodwill on acquisitions before 1 January follows: of the liability and potential prepaid rents to the lessor. 2004 is accounted for in accordance with the previous Lease liability is also recognised at the commencement accounting standards and the carrying amount is used as IT software 3–10 years Other intangible assets 3–10 years date, and measured at the present value of the lease the deemed cost in accordance with the IFRS. payments. Goodwill is measured at historical cost less accumulated Depreciations on right-of-use assets and interests on the impairment losses. Goodwill is not amortised. Property, plant and equipment lease liabilities are recognised in the p/l. Property, plant and equipment comprise properties Other intangible assets occupied for Sampo’s own activities, office equipment, Group as lessor fixtures and fittings, and furniture. Classification of IT software and other intangible assets, whether procured properties as those occupied for own activities and those Leases are included in ‘Investment property’ in the externally or internally generated, are recognised in for investment activities is based on the square metres balance sheet. They are depreciated over their expected the balance sheet as intangible assets with finite useful in use. If the proportion of a property in Sampo’s use is useful lives on a basis consistent with similar owned lives, if it is probable that the expected future economic no more than 10 per cent, the property is classified as an property, plant and equipment, and the impairment benefits that are attributable to the assets will flow to investment property. losses are recognised on the same basis as for these items. the Group and the cost of the assets can be measured Rental income is recognised on a straight-line basis over reliably. The cost of internally generated intangible assets Property, plant and equipment are measured at historical the lease term in profit or loss. is determined as the sum of all costs directly attributable cost less accumulated depreciation and impairment to the assets. Research costs are recognised as expenses losses, except for Topdanmark where the carrying amount in profit or loss as they are incurred. Costs arising from is based on revaluation i.e. fair value less accumulated development of new IT software or from significant depreciation and impairment losses.

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Improvement costs are added to the carrying amount of any such indication exists, the Group will estimate the Investment property a property when it is probable that the future economic recoverable amount of the asset. In addition, goodwill, benefits that are attributable to the asset will flow to the intangible assets not yet available for use and intangible Investment property is held to earn rentals and for capital entity. Costs for repairs and maintenance are recognised assets with an indefinite useful life will be tested for appreciation. The investment property is measured the as expenses in the period in which they were incurred. impairment annually, independent of any indication same way as property, plant and equipment. The depreci- of impairment. For impairment testing the goodwill is ation periods and methods and the impairment principles Items of property, plant and equipment are depreciated allocated to the cash-generating units of the Group from are also the same as those applied to corresponding on a straight-line basis over their estimated useful life. In the date of acquisition. In the test the carrying amount property occupied for own activities. The investment most cases, the residual value is estimated at zero. Land of the cash-generating unit, including the goodwill, is property of the associate Nordea in the Holding segment is is not depreciated. Estimates of useful life are reviewed compared with its recoverable amount. measured at fair value in item Investments in associates. at financial year-ends and the useful life is adjusted if the estimates change significantly. The estimated useful lives The recoverable amount is the higher of an asset’s fair The fair value of investment property is estimated using by asset class are as follows: value less costs to sell and its value in use. The value a method based on estimates of future cash flows and a in use is calculated by estimating future net cash flows comparison method based on information from actual Residential, business premises and offices 20–60 years expected to be derived from an asset or a cash-generating sales in the market. The fair value of investment property Industrial buildings and warehouses 30–60 years unit, and by discounting them to their present value using is presented in the Notes. Components of buildings 10–15 years a pre-tax discount rate. If the carrying amount of an asset IT equipment and motor vehicles 3–5 years Other equipment 3–10 years is higher than its recoverable amount, an impairment loss The valuation takes into account the characteristics of is recognised in profit or loss. In conjunction with this, the the property with respect to location, condition, lease Depreciation of property, plant or equipment will be impaired asset’s useful life will be re-determined. situation and comparable market information regarding discontinued, if the asset in question is classified as held rents, yield requirements and unit prices. During the for sale in accordance with IFRS 5 Non-current Assets Held If there is any indication that an impairment loss financial year, the valuations were conducted by the for Sale and Discontinued Operations. ­recognised for an asset in prior periods may no longer Group’s internal resources. exist or may have decreased, the recoverable amount of the asset will be estimated. If the recoverable amount of Impairment of intangible assets and the asset exceeds the carrying amount, the impairment Provisions property, plant and equipment loss is reversed, but no more than to the carrying amount which it would have been without recognition of the A provision is recognised when the Group has a present At each reporting date the Group assesses whether there impairment loss. Impairment losses recognised for legal or constructive obligation as a result of a past is any indication that an intangible asset or an item goodwill are not reversed. event, and it is probable that an outflow of resources of property, plant or equipment may be impaired. If embodying economic benefits will be required to settle

FINANCIAL STATEMENTS 2019 53 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

the obligation and the Group can reliably estimate the Reinsurance contracts P&C Insurance business amount of the obligation. If it is expected that some or all of the ­expenditure required to settle the provision will be A reinsurance contract is a contract which meets the Classification of insurance contracts reimbursed by another party, the reimbursement will be IFRS 4 requirements for insurance contracts and on the In classifying insurance contracts and examining their treated as a separate asset only when it is virtually certain basis of which Sampo Group (the cedant) may receive related risks, embedded contracts are interpreted as one that the Group will receive it. compensation from another insurer (the reinsurer), if it contract. becomes liable for paying compensation based on other insurance contracts it has issued. Such compensation Other than insurance contracts, i.e. contracts where the Insurance and investment contracts received on the basis of reinsurance contracts is included risk is not transferred, include Captive contracts in which in the balance sheet under 'Reinsurers’ share of insurance an insurance company underwrites a company’s direct Insurance contracts are treated, in accordance with IFRS liabilities' and 'Other assets'. The former item includes the business and reinsures the same risk in an insurance 4, either as insurance or investment contracts. Under the reinsurers’ share of the provisions for unearned premiums company in the same group as the policyholder. There are standard, insurance contracts are classified as insurance and claims outstanding in the Group’s reinsured also contracts in P&C insurance (Reverse Flow Fronting contracts if significant insurance risk is transferred insurance contracts, while the latter includes short-term contracts) in which the insurance company grants between the policyholder and the insurer. If the risk trans- receivables from reinsurers. insurance and then transfers the insurance risk to the ferred on the basis of the contract is essentially financial final insurer. For both the above types of contract, only risk rather than significant insurance risk, the contract When the Group itself has to pay compensation to another the net effect of the contract relationship is recognised is classified as an investment contract. Classification of a insurer on the basis of a reinsurance contract, the liability in the income statement and balance sheet (instead of contract as an insurance contract or investment contract is recognised in the item 'Other liabilities'. the gross treatment, as previously). The prerequisite for determines the measurement principle applied to it. net treatment is that the net retention recognised on the Receivables and liabilities related to reinsurance are contract is zero. Sampo treats the liabilities arising from contracts in measured uniformly with the cedant's receivables and the first phase of the standard according to national liabilities. Reinsurance receivables are tested annually for There are also contracts in P&C insurance in which the ­accounting standards, except for the equalisation reserve impairment. Impairment losses are recognised through insurance risk is eliminated by a retrospective insurance and its changes which is reported in equity and profit or profit or loss, if there is objective evidence indicating that premium, i.e. the difference between forecast and actual loss, in accordance with the IFRS. the Group (as the cedant) will not receive all amounts of losses is evened out by an additional premium directly or money it is entitled to on a contractual basis. in connection with the annual renewal of the insurance. The risks involved in insurance and investment contracts are widely elaborated in the Group’s note 40.

FINANCIAL STATEMENTS 2019 54 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

The net cash flow from these contracts is recognised The provision for claims outstanding in direct P&C insur- insurance) are raised annually by the TEL (Employee directly in the balance sheet, without recognising it first ance and reinsurance may be calculated by statistical Pensions Act) index in order to maintain the real value of in the income statement as premiums written and claims methods or through individual assessments of individual the pensions. The index raises are not the responsibility of incurred. claims. Often a combination of the two methods is used, the insurance companies, but are funded by the so-called meaning large claims are assessed individually while pay-as-you-go principle, i.e. each year premiums written Insurance liabilities small claims and claims incurred but not reported (the include index raises to the same amount that is paid out Insurance liabilities are the net contractual obligations IBNR provision) are calculated using statistical methods. in that year. In practice, the P&C insurance companies which the insurer has on the basis of insurance contracts. collect a so-called expense loading along with their Insurance liabilities, consisting of the provisions for Premiums written for P&C insurance and reinsurance premiums written, which is then forwarded to the central unearned premiums and unexpired risks and for claims are recognised in the income statement when the annual organisation for the particular insurance line. The central outstanding, correspond to the obligations under insurance premium is due for payment. organisation distributes the pay-as-you-go contributions insurance contracts. collected so that the company undertaking the type of Liability adequacy test insurance in question receives an amount equal to the The provision for unearned premiums is intended to A liability adequacy test is performed separately for both compensation falling under the pay-as-you-go system cover anticipated claims costs and operating expenses the provision for claims outstanding and the provision for it has paid that year. The insurer’s participation in the during the remaining term of insurance contracts in unearned premiums. The provision for claims outstanding payment is proportional to the insurer’s market share in force. In P&C insurance and reinsurance, the provision for is based on estimates of future cash flows. The estimates the insurance line in question. unearned premiums is normally calculated on a strictly are made by using well-established actuarial methods. proportional basis over time, i.e. on a pro rata temporis The pay-as-you-go system related to pension index basis. If premiums are judged to be insufficient to cover The provision for unearned premiums is, for the most part, raises is not treated as an insurance activity under anticipated claims costs and operating expenses, the calculated on a strictly proportional basis over time (so IFRS 4 and does not generate any risk for the insurance provision for unearned premiums must be augmented called pro rata temporis principle). The adequacy of the company. Thus, the pay-as-you-go contribution collected by a provision for unexpired risks. Calculation of the provision for unearned premiums is tested by calculating together with the insurance premium is not deemed to provision for unexpired risks must also take into account a provision for unexpired risks for each company per busi- be premium income, and the pension index raise paid instalment premiums not yet due. ness area and line of business. If the provisions are judged out is not deemed to be claims incurred. Because the to be insufficient, the provision for unearned premiums is collected index raise corresponds in amount to the paid The provision for claims outstanding is intended to cover augmented by recognising a provision for unexpired risks. out pension index raise, the said items are set-off in the the anticipated future payments of all claims incurred, Income Statement item 'Other expenses from operations'. including claims not yet reported to the company; i.e. the Pay-as-you-go system for P&C insurance The share of a balancing figure not yet received from, or IBNR (incurred but not reported) provision. The provision Pensions and compensation for healthcare or medical not paid by, a central organisation is presented as current for claims outstanding includes claims payments plus all rehabilitation paid on the basis of Finland’s statutory P&C receivables or liabilities in the balance sheet items 'Other estimated costs of claim settlements. insurance (accident, motor third party liability and patient assets' or 'Other liabilities'.

FINANCIAL STATEMENTS 2019 55 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Deferred acquisition costs ness specifies the application of this feature. In unit-linked Portfolio, if the gains or losses had been realised at the In the P&C insurance business, acquisition costs clearly contracts the policyholder carries the investment risk by balance sheet date. relating to the writing of insurance contracts and choosing the investment funds linked to the contracts. ­extending beyond the financial year are recognised as In Topdanmark unit-linked contracts include both assets in the balance sheet. Acquisition costs include Measurement of insurance and investment insurance and investment contracts. Insurance contracts operating expenses directly or indirectly attributable contracts are measured in accordance with IFRS 4. Investment to writing insurance contracts, fees and commissions, In Mandatum, national accounting standards in accordance contracts, on the other hand, are measured in accordance marketing expenses and the salaries and overheads of with IFRS 4 Insurance contracts are applied to all insurance with IAS 39 Financial Instruments: Recognition and sales staff. Acquisition costs are amortised in the same contracts and investment contracts with DPF. Measurement. Investment contracts do not include way as provisions for unearned premiums, usually in 12 discretionary participation feature. months at the maximum. All contracts, except unit-linked contracts and the assumed reinsurance, include DPF. In those unit-linked contracts All unit-linked contracts insurance are payable on which are not insurance contracts, the policyholder has the demand at market value. In case of death, 101% of Life insurance business possibility to transfer the return on savings from unit-linked the amount is payable. This feature is considered an schemes to guaranteed interest with DPF. Thus, the same ­insignificant insurance risk, and the contracts are Classification of insurance contracts standard is applied to these contracts as to contracts with categorized and measured as investment contracts. There Policies issued by the life insurance business are classified DPF. are no other surrender rights and values to take into as either insurance contracts or investment contracts. consideration. Insurance contracts are contracts that carry significant The surrender right, guaranteed interest and the insurance risk or contracts in which the policyholder has unbundling of the insurance component from the deposit Insurance and investment contract liabilities the right to change the contract by increasing the risk. As component and similar features are not separated and and reinsurance assets capital redemption contracts do not carry insurance risk, measured separately. Liabilities arising from insurance and investment these contracts are classified as investment contracts. contracts consist of provisions for unearned premiums In Mandatum, regarding the group pension portfolio and outstanding claims. In the life insurance business, The discretionary participation feature (DPF) of a contract transferred from Suomi Mutual (=segregated portfolio), various methods are applied in calculating liabilities is a contractual right held by a policyholder to receive a so-called shadow accounting is applied, as permitted which involve assumptions on matters such as mortality, additional benefits, as a supplement to the guaranteed in IFRS 4.30, by adjusting the equity with the amount of morbidity, the yield level of investments, future operating minimum benefits. The supplements are bonuses based unrealised gains and losses of the agreement. The equity expenses and the settlement of claims. on the reserves of policies credited to the policy reserve, is adjusted with an amount that unrealised gains or losses additional benefits in the case of death, or lowering of would have affected the Segregated Portfolio in accordance Changes in the liabilities of reinsurance have been insurance premiums. In Mandatum, the principle of fair- with the profit distribution policy of the Segregated calculated at variable rates of exchange.

FINANCIAL STATEMENTS 2019 56 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

In direct insurance, the insurance liability is calculated by transactions based on historical data. The amounts of Employee benefits policy, while in reinsurance it is calculated on the basis of claims include the guaranteed interest and an estimation the reports of the ceding company or the company’s own of future bonuses. The present values of the cash flows bases of calculation. have been discounted to the balance sheet date. Post-employment benefits

The interest rate used in discounting liabilities is, at most, For the unit-linked business, the present values of Post-employment benefits include pensions and life the maximum rate accepted by the authorities in each the insurance risk and expense results are calculated insurance. country. correspondingly. If the aggregate amount of the liability for the unit-linked and other business presumes an Sampo has defined benefit plans in Sweden and Norway, The provision for claims outstanding is intended to cover augmentation, the liability is increased by the amount and defined contribution plans in other countries. The the anticipated future payments of all claims incurred, shown by the test and recognised in profit or loss. most significant defined contribution plan is that arranged including claims not yet reported to the company (the through the Employees’ Pensions Act (TyEL) in Finland. “IBNR” provision). The provision for claims outstanding Principle of fairness includes claim payments plus all costs of claim settlements. According to Chapter 13, Section 2 of the Finnish In the defined contribution plans, the Group pays fixed Insurance Companies’ Act, the Principle of Fairness must contributions to a pension insurance company and The amounts of short- and long-term liabilities in be observed in life insurance and investment contracts has no legal or constructive obligation to pay further technical provisions are determined annually. with a discretionary participation feature. If the solvency ­contributions. The obligations arising from a defined requirements do not prevent it, a reasonable part of the c­­ontribution plan are recognised as an expense in the Liability adequacy test surplus has to be returned to these policies as bonuses. period that the obligation relates to. A liability adequacy test is applied to all portfolios and the need for augmentation is checked, company by company, Mandatum aims at giving a total return before charges In the defined benefit plans, the company still has on the basis of the adequacy of the whole technical and taxes on the original insurance portfolio’s policy­ obligations after paying the contributions for the financial provisions. The test includes all the expected contractual holders’ savings in contracts with DPF that is at least the period and bears their actuarial and/or investment risk. cash flows for non-unit-linked liabilities. The expected yield of those long term bonds, which are considered The obligation is calculated separately for each plan contractual cash flows include expected premiums, to have lowest risk. The total return consists of the using the projected unit credit method. In calculating the claims, bonuses and expenses. The claims have been ­guaranteed interest rate and bonuses determined amount of the obligation, actuarial assumptions are used. estimated including surrenders and other insurance annually. Continuity is pursued in the level of bonuses. The pension costs are recognised as an expense for the service period of employees.

FINANCIAL STATEMENTS 2019 57 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Defined benefit plans are both funded and unfunded. Termination benefits In the schemes settled in shares, the strike amounts The amounts reported as pension costs during a financial received on the exercise of the options are recognised in year consist of the actuarially calculated earnings of An obligation based on termination of employment is the shareholder’s equity. old-age pensions during the year, calculated straight-line, recognised as a liability when the Group is verifiably based on pensionable income at the time of retirement. committed to terminate the employment of one or more The fair value of the schemes has been determined using The calculated effects in the form of interest expense for persons before the normal retirement date or to grant the Black-Scholes-pricing model. The fair value of the crediting/appreciating the preceding years’ established benefits payable upon termination as a result of an offer to market-­based part of the incentive takes into consideration pension obligations are then added. The calculation of promote voluntary redundancy. As no economic benefit the model’s forecast concerning the number of incentive pension costs during the financial year starts at the begin- is expected to flow to the employer from these benefits units to be paid as a reward. The effects of non-market ning of the year and is based on assumptions about such in the future, they are recognised immediately as an based terms are not included in the fair value of the factors as salary growth and price inflation throughout expense. Obligations maturing more than 12 months later incentive; instead, they are taken into account in the the duration of the obligation and on the current market than the balance sheet date are discounted. The benefits number of those incentive units that are expected to be interest rate adjusted to take into account the duration of payable upon termination at Sampo are the monetary and exercised during the vesting period. In this respect, the the pension obligations. pension packages related to redundancy. Group will update the assumption on the estimated final number of incentive units at every interim or annual The current year pension cost and the net interest of the balance sheet date. net liability is recognised thru p/l in pension costs. The Share-based payments actuarial gains and losses and the return of the plan assets (excl. net interest) are recognised as a separate item in During the financial year, Sampo had four valid share- Income taxes other comprehensive income. based incentive schemes settled in cash (the long-term incentive schemes 2014 I, 2014 II,2017 I and 2017 II for the Item Tax expenses in the income statement comprise The fair value of the plan assets covered by the plan management and key employees). Topdanmark had one current and deferred tax. Tax expenses are recognised is deducted from the present value of future pension mainly share-settled incentive scheme for the executive through profit or loss, except for items recognised directly obligations and the remaining net liability (net asset) is board and senior executives during the financial year. in equity or other comprehensive income, in which case recognised separately in the balance sheet. the tax effect will also be recognised those items. Current The schemes have been measured at fair value at the tax is calculated based on the valid tax rate of each country. The Group has also certain voluntary defined benefit grant date and at every reporting date thereafter. Tax is adjusted by any tax related to previous periods. plans. These are intra-Group and have no material significance. In the schemes settled in cash, the valuation is recognised Deferred tax is calculated on all temporary differences as a liability and changes recognised through profit or loss. between the carrying amount of an asset or liability in

FINANCIAL STATEMENTS 2019 58 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

the balance sheet and its tax base. Deferred tax is not Cash and cash equivalents balance sheet date. The actual outcome may deviate from recognised on non-deductible goodwill impairment, and results based on estimates and assumptions. Any changes nor is it recognised on the undistributed profits of subsidi- Cash and cash equivalents comprise cash and short-term in the estimates will be recognised in the financial year aries to the extent that it is probable that the temporary deposits (3 months). during which the estimate is reviewed and in all subse- difference will not reverse in the foreseeable future. quent periods. Sampo presents cash flows from operating activities Deferred tax is calculated by using the enacted tax using the indirect method in which the profit (loss) before Sampo’s main assumptions concerning the future and rates prior to the balance sheet date. A deferred tax taxation is adjusted for the effects of transactions of a the key uncertainties related to balance sheet estimates asset is recognised to the extent that it is probable that non-cash nature, deferrals and accruals, and income and are related, for example, to assumptions used in actuarial future taxable income will be available against which a expense associated with investing or financing cash flows. calculations, determination of fair values of non-quoted ­temporary difference can be utilised. financial assets and liabilities and investment property In the cash flow statement, interest received and paid and determination of the impairment of financial is presented in cash flows from operating activities. In assets and intangible assets. From Sampo’s perspective, Share capital addition, the dividends received are included in cash accounting policies concerning these areas require most flows from operating activities. Dividends paid are significant use of estimates and assumptions. The incremental costs directly attributable to the issue of presented in cash flows from financing. new shares or options or to the acquisition of a business are included in equity as a deduction, net of tax, from the Actuarial assumptions proceeds. Accounting policies requiring management judgement and key Evaluation of insurance liabilities always involves Dividends are recognised in equity in the period when sources of estimation uncertainties uncertainty, as technical provisions are based on they are approved by the Annual General Meeting. When estimates and assumptions concerning future claims the parent company or other Group companies purchase Preparation of the accounts in accordance with the costs. The ­estimates are based on statistics on historical the parent company’s equity shares, the consideration IFRS requires management estimates and assumptions claims available to the Group on the balance sheet date. paid is deducted from the equity as treasury shares until that affect the revenue, expenses, assets, liabilities The ­uncertainty related to the estimates is generally they are cancelled. If such shares are subsequently sold or and contingent liabilities presented in the financial greater when estimating new insurance portfolios or reissued, any consideration received is included in equity. statements. Judgement is needed also in the application portfolios where clarification of a loss takes a long time of accounting policies. The estimates made are based on because complete claims statistics are not yet available. the best information available at the balance sheet date. In addition to the historical data, estimates of insurance The estimation is based on historical experiences and liabilities take into consideration other matters such most probable assumptions concerning the future at the as claims development, the amount of unpaid claims,

FINANCIAL STATEMENTS 2019 59 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

legislative changes, court rulings and the general Fair values of investment property have been determined The amendments to IFRS 9 Financial Instruments ­economic situation. internally during the financial year on the basis of (effective for annual periods beginning on 1 Jan 2018 or comparative information derived from the market. They after) supersede IAS 39 Financial Instruments: Recognition A substantial part of the Group’s P&C insurance liabilities include management assumptions concerning market and Measurement. Sampo is going to utilise the temporary concerns statutory accident and traffic insurance. The return requirements and the discount rate applied. exception option, outlined in the next chapter, and apply most significant uncertainties related to the evaluation the standard on the annual period beginning on 1 Jan of these liabilities are assumptions about inflation, 2022.The new standard changes the classification and ­mortality, discount rates and the effects of legislative Impairment tests measurement of financial assets and includes a new revisions and legal practices. impairment model based on expected credit losses. The Goodwill, intangible assets not yet available for use, hedge accounting will continue to have three different The actuarial assumptions applied to life insurance and intangible assets with an indefinite useful life are hedging relationships. liabilities are discussed in more detail under 'Insurance tested for impairment at least annually. The recoverable and investment contract liabilities and reinsurance assets'. amounts from cash-generating units have mainly been As the upcoming IFRS 4 superseding standard IFRS 17 determined using calculations based on value in use. Insurance Contracts (by IASB tentative decision effective Defined benefit plans as intended in IAS 19 are also These require management estimates on matters such as for annual periods beginning on 1 Jan 2022 or after) will estimated in accordance with actuarial principles. As the future cash flows, the discount rate, and general economic have an impact on the insurance liabilities valuation, the calculation of a pension plan reserve is based on expected growth and inflation. insurance companies have been given additional options future pensions, assumptions must be made not only regarding the adoption of IFRS 9. If certain preconditions of discount rates, but also of matters such as mortality, regarding the insurance liabilities are met, the company employee turnover, price inflation and future salaries. Application of new or revised may apply the so-called temporary exception option and ifrss and interpretations defer the implementation until the adoption of IFRS 17 standard, at the latest on annual period beginning on 1 Jan Determination of fair value The Group will apply the following new or amended 2022. The temporary exemption may be applied, if the standards and interpretations related to the Group’s Group’s amount of insurance liabilities is greater than 90% The fair value of any non-quoted financial assets is ­business in later financial years when they become of the total amount of liabilities. The application is also determined using valuation methods that are generally ­effective, or if the effective date is other than the possible, if the ratio is greater than 80%, and the Group accepted in the market. These methods are discussed in beginning of the financial year, during the financial year does not engage in a significant activity unconnected more detail above under 'Fair value'. following the effective date. with insurance. Another allowed option is to apply IFRS 9

FINANCIAL STATEMENTS 2019 60 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

from 1 Jan 2018 on, but to remove some of the accounting IFRS 9 standard at the same time with the upcoming IFRS The Group’s associate Nordea has applied IFRS 9 standard mismatches, caused by the different valuation methods 17 standard. The Group has started analyzing the effects in its financial statements from 1 January 2018 on. of assets and liabilities, from the income statement and of applications in all the other areas as well, as the new transfer them to other comprehensive income. standards will have a significant impact on the Group’s European Commission had not at the balance sheet date financial statements. endorsed IFRS 17 standard to be adopted in the EU. In The Group has analyzed the preconditions for applying addition, IASB has announced that it might take into the temporary exemption, and stated that they are met. consideration some amendments to IFRS 17 standard Therefore, the Group will apply the exemption and apply before its effective date.

FINANCIAL STATEMENTS 2019 61 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Segment Information

Geographical information has been disclosed about presenting the consolidated financial statements.The Depreciation and amortisation by segment are disclosed income from external customers and non-current segment revenue, expense, assets and liabilities, either in notes 10–12 and investments in associates in note 13. assets. The reported areas are Finland, Sweden, Norway, directly attributable or reasonably allocable, have been ­Denmark and the Baltic countries. allocated to the segments. Inter-segment pricing is based on market prices. The transactions, assets and liabilities Segment information has been produced in accordance between the segments are eliminated in the consolidated with the accounting policies adopted for preparing and financial statements on a line-by-line basis.

FINANCIAL STATEMENTS 2019 62 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Consolidated Income Statement by Business Segment for Year Ended 31 December 2019

Top- Elimi- Top- Elimi- EURm If danmark Mandatum Holding nation Group EURm If danmark Mandatum Holding nation Group

Insurance premius written 4,475 2,677 1,596 - - 8,749 Other comprehensive Net income from income for the period investments 229 1,037 1,267 -2 -15 2,515 Other operating income 33 3 23 16 -15 60 Items reclassifiable to profit or loss

Claims incurred -2,751 -1,223 -1,492 - - -5,466 Exchange differences -33 -2 - -4 - -39 Change in liabilities for Available-for-sale financial insurance and investment assets 285 - 114 147 20 566 contracts -87 -1,864 -971 - 3 -2,919 Share of associate's other Staff costs -558 -272 -52 -15 - -897 comprehensive income - - - -30 - -30 Other operating expenses -443 -131 -81 -13 15 -653 Taxes -63 - -27 -29 -4 -123 Total items reclassifiable to profit or loss, net of tax 189 -2 87 83 16 373 Finance costs -16 -10 -9 10 12 -13 Share of associates' profit/loss 1 22 0 298 - 321 Items not reclassifiable to profit or loss - Valuation loss on dividend distribution of associate Actuarial gains and losses shares - - - -155 - -155 from defined pension plans -58 - - - - -58 Taxes 13 - - - - 13

Profit before taxes 884 238 280 139 0 1,541 Total items not reclassifiable to profit or loss, net of tax -45 - - - - -45 Taxes -192 -53 -58 -1 - -304 TOTAL COMPREHENSIVE Profit for the year 692 185 222 138 0 1,237 INCOME FOR THE YEAR 836 183 308 222 16 1,565

Profit attributable to Owners of the parent 1,130 Non-controlling interests 107

Total comprehensive income attributable to Owners of the parent 1,458 Non-controlling interests 107

FINANCIAL STATEMENTS 2019 63 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Consolidated Income Statement by Business Segment for Year Ended 31 December 2018

Top- Elimi- Top- Elimi- EURm If danmark Mandatum Holding nation Group EURm If danmark Mandatum Holding nation Group

Insurance premius written 4,325 2,509 1,074 - -1 7,907 Other comprehensive Net income from income for the period investments 229 -280 -26 2 -28 -104 Other operating income 30 3 212 17 -18 244 Items reclassifiable to profit or loss

Claims incurred -2,716 -1,198 -1,116 - 15 -5,015 Exchange differences -87 -9 - -2 - -97 Change in liabilities for Available-for-sale financial insurance and investment assets -364 - -314 -61 - -739 contracts -35 -458 426 - -18 -85 Share of associate's other Staff costs -529 -269 -46 -11 - -855 comprehensive income - - - -61 - -61 Other operating expenses -445 -119 -67 -14 18 -627 Taxes 80 - 67 12 - 159 Total items reclassifiable to profit or loss, net of tax -372 -9 -247 -112 - -739 Finance costs -15 -11 -7 3 12 -18 Share of associates' profit/loss 4 22 0 621 - 647 Items not reclassifiable to profit or loss Actuarial gains and losses Profit before taxes 848 199 450 618 -20 2,094 from defined pension plans -6 - - - - -6 Taxes 1 - - - - 1 Taxes -187 -43 -91 0 4 -317 Total items not reclassifiable to profit or loss, net of tax -5 - - - - -5 Profit for the year 661 156 360 618 -16 1,778

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 284 147 112 506 -16 1,034

Profit attributable to Owners of the parent 1,687 Non-controlling interests 91

Total comprehensive income attributable to Owners of the parent 943 Non-controlling interests 91

FINANCIAL STATEMENTS 2019 64 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Consolidated Balance Sheet by Business Segment at 31 December 2019

Top- Elimi- EURm If danmark Mandatum Holding nation Group EURm Group Assets Equity Property, plant and Share capital 98 equipment 153 127 14 8 - 302 Reserves 1,530 Investment property 2 540 138 - - 679 Retained earnings 10,062 Intangible assets 544 1,443 162 2 - 2,151 Other components of equity 217 Investments in associates 14 223 1 6,979 - 7,217 Equity attributable to Financial assets 10,726 6,916 4,671 5,168 -4,039 23,443 parent company's equity Investments related to unit- holders 11,908 linked insurance contracts - 4,832 8,170 - -27 12,975 Non-controlling interests 635 Tax assets 19 3 - 0 -4 19 Total equity 12,542 Reinsurers' share of insurance liabilities 210 78 1 - - 289 Total equity and liabilities 51,939 Other assets 1,759 239 137 58 -9 2,185 Cash and cash equivalents 331 74 952 1,321 - 2,677 Total assets 13,759 14,476 14,247 13,535 -4,079 51,939

Liabilities Liabilities for insurance and investment contracts 8,778 5,337 3,926 - - 18,041 Liabilities for unit-linked insurance and investment contracts - 6,278 8,117 - -27 14,368 Subordinated debt 396 234 349 494 -271 1,202 Other financial liabilities 25 100 15 3,452 - 3,592 Tax liabilities 281 171 121 15 - 587 Provisions 20 - - - - 20 Employee benefits 99 - - - - 99 Other liabilities 908 320 197 73 -9 1,489 Total liabilities 10,506 12,440 12,724 4,034 -308 39,396

FINANCIAL STATEMENTS 2019 65 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Consolidated Balance Sheet by Business Segment at 31 December 2018

Top- Elimi- EURm If danmark Mandatum Holding nation Group EURm Group Assets Equity Property, plant and Share capital 98 equipment 24 130 5 3 - 162 Reserves 1,530 Investment property 4 513 148 - - 665 Retained earnings 10,944 Intangible assets 512 1,472 158 0 - 2,143 Other components of equity -186 Investments in associates 14 225 3 7,823 - 8,065 Equity attributable to Financial assets 10,753 6,028 4,902 5,069 -4,058 22,693 parent company's equity Investments related to holders 12,386 unit-linked insurance - 3,735 6,960 - -24 10,671 Non-controlling interests 628 Tax assets 11 2 - 15 -4 24 Total equity 13,014 Reinsurers' share of insurance liabilities 208 85 1 - - 294 Total equity and liabilities 49,340 Other assets 1,704 279 182 107 -8 2,263 Cash and cash equivalents 294 34 586 1,448 - 2,361 Total assets 13,525 12,502 12,944 14,465 -4,095 49,340 Geographical Information Liabilities Liabilities for insurance and investment contracts 8,934 5,259 4,221 - - 18,415 EURm Finland Sweden Norway Denmark Baltic Total Liabilities for unit-linked 2019 insurance and investment contracts - 4,460 6,955 - -24 11,390 Revenue from external customers 2,515 1,510 1,382 3,162 176 8,744 Subordinated debt 400 234 100 -271 464 Non-current assets 437 7,4 83 73 2,350 7 10,350 Other financial liabilities 4 105 33 4,104 - 4,247 Tax liabilities 207 188 96 - -4 487 2018 Provisions 18 - - - - 18 Revenue from external Employee benefits 51 - - - - 51 customers 1,992 1,488 1,327 2,989 169 7,965 Other liabilities 785 227 173 78 -9 1,254 Non-current assets 404 8,263 13 2,353 1 11,034 Total liabilities 10,401 10,473 11,578 4,182 -308 36,326

The revenue includes insurance premiums according to the underwriting country, consisting of premiums earned for P&C insurance and premiums written for life insurance, and net investment income and other operating income in the holding segment.

Non-current assets comprise of intangible assets, investments in associates, property, plant and equipment, and investment property.

FINANCIAL STATEMENTS 2019 66 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Material Partly-Owned Subsidiairies

Equity interest held by non-controlling interests Share of non-controlling interests of the balance sheet Name Country 2019 2018 EURm 2019 2018 Topdanmark A/S Denmark 51.8 51.4 Assets Property, plant and equipment 66 67 Accumulated balances of material non-controlling Investment property 279 264 interests 635 628 Intangible assets 357 341 Investments in associates 116 116 ­The summarised financial information. Financial assets 3,580 3,099

Figures are before inter-company eliminations. Investments related to unit-linked insurance 2,501 1,920 Tax assets 2 1 Summarised statement of profit or loss Reinsurers' share of insurance liabilities 41 44 Other assets 124 143 EURm 2019 2018 Cash and cash equivalents 38 17 Insurance premius written 1,386 1,290 Total assets 7,103 6,011 Net income from investments 537 -144 Other operating income 1 2 Liabilities Liabilities for insurance and investment contracts 2,762 2,704 Claims incurred -633 -616 Liabilities for unit-linked insurance and investment contracts 3,250 2,293 Change in liabilities for insurance and investment contracts -965 -236 Subordinated debt 121 120 Staff costs -143 -138 Other financial liabilities 52 54 Other operating expenses -52 -47 Tax liabilities 118 96 Other liabilities 166 117 Finance costs -5 -6 Total liabilities 6,469 5,383 Share of associates' profit/loss 11 11

Total equity attributable to non-controlling interests 635 628 Profit before taxes 137 116

Taxes -30 -25

Profit for the year attributable to non-controlling interests 107 91

FINANCIAL STATEMENTS 2019 67 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Business Acquisitions

Year 2019 The purchase price allocation on the acquisition is presented below: EURm In December 2019, the Group's subsidiary If Cost of the business acquisition 241 ­Skadeförsäkring Holding AB(p) acquired the whole capital Net assets acquired without the pre-acquisition goodwill 84 stock of a Norwegian Vertikal Helseassistanse AS. The Purchase consideration to be allocated 157 purchase price was EURm 33 and the acquired net assets

EURm 7. The acquisition had no material impact on Allocated to other intangible assets Sampo Group's financial reporting. Customer relations 54 Other intangible assets 1 Deferred tax liability related to allocations -12 Goodwill 114 Year 2018 Total 157

The Swedish NDX Intressenter AB became an associate The allocations to the customer relations and other intangible assets are amortised over 8 years. Their total net effect sums to about EUR 43 million. The net effect of annual amortisation is about EUR 5 million. of the Group in March 2018 with an ownership of 36.25%. The p/l and balance sheet of the company are presented in the Holding segment.

FINANCIAL STATEMENTS 2019 68 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Group’s Other Notes to the Accounts

1 Insurance premiums written

EURm 2019 2018 EURm 2019 2018 Financial assets available-for-sale P&C insurance 5,947 5,737 Debt securities Life insurance Interest income 162 158 Insurance contracts 2,060 1,751 Impairment losses 0 15 Investment contracts 1,030 687 Gains/losses 10 18 Insurance premiums written, gross 9,037 8,174 Exchange differences 0 -2 Equity securities Reinsurers' share Gains/losses 92 109 P&C insurance -281 -259 Impairment losses -20 -36 Life insurance, insurance contracts -7 -7 Dividend income 40 47 Reinsurers' share, total -288 -267 Total 286 310

Group insurance premiums written total, net ¹) 8,749 7,907 Total from financial assets 279 286 1) The change in unearned premiums is presented in note 4, The change in insurance and investment liabilities. Other assets Investment properties 2 Net income from investments Gains/losses 2 1

Expense on other than financial liabilities -6 -6 If

Effect of discounting annuities -29 -31 EURm 2019 2018 Financial assets Fee and commission expenses Derivative financial instruments Asset management -18 -21 Gains/losses -15 -34

If insurance, total 229 229 Loans and receivables Interest income 9 10 Included in gains/losses from financial assets available-for-sale is a net gain of EURm -84 (-23) transferred from the fair value reserve.

FINANCIAL STATEMENTS 2019 69 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Topdanmark

EURm 2019 2018 EURm 2019 2018 Financial assets Derivative financial instruments Net income from investment properties 48 18 Gains/losses 44 -32 Pension tax return -147 4 Financial assets for trading Debt securities Effect of discounting annuities, insurance liabilities -82 -12 Interest income 103 89 Gains/losses -27 -54 Other expenses related to investment activities -3 -2 Equity securities Gains/losses 146 -46 Topdanmark, total 1,037 -280 Dividend income 23 26 Total 244 15

Investments related to unit-linked contracts Debt securities Interest income 82 71 Gains/losses -35 -51 Equity securities Gains/losses 627 -166 Dividend income 87 43 Derivatives Interest income -44 -35 Gains/losses 158 -108 Other financial assets Gains/losses 55 -26 Total 929 -273

Loans and receivables Interest income 3 2

Total from financial assets 1,221 -287

FINANCIAL STATEMENTS 2019 70 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Mandatum

EURm 2019 2018 EURm 2019 2018 Financial assets Financial assets available-for-sale Derivative financial instruments Debt securities Gains/losses -63 -125 Interest income 71 80 Gains/losses -3 -3 Investments related to unit-linked contracts Impairment losses 0 5 Debt securities Exchange differences 18 50 Interest income 39 49 Equity securities Gains/losses 51 -45 Gains/losses 235 152 Equity securities Impairment losses -15 -57 Gains/losses 752 -303 Dividend income 106 112 Dividend income 59 48 Total 410 339 Loans and receivables Interest income 0 6 Total financial assets 1,259 -43 Other financial assets Gains/losses 8 -15 Other assets Total 908 -259 Investment properties Gains/losses 2 0 Loans and receivables Other 0 3 Interest income 2 1 Total other assets 2 3 Exchange differences 2 1 Total 4 2 Net fee income Asset management -19 -15 Fee income 25 28 Total 6 13

Mandatum, total 1,267 -26

Included in gains/losses from financial assets available-for-sale is a net gain of EURm -236 (-117) transferred from the fair value reserve.

FINANCIAL STATEMENTS 2019 71 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Holding

EURm 2019 2018 The changes in the fair value reserve are disclosed in the Statement of changes in equity. Other Financial assets income and expenses comprise rental income, maintenance expenses and depreciation of investment property. All the income and expenses arising from investments are included in Net Derivative financial instruments income from investments. Gains/losses include realised gains/losses on sales and unrealised Gains/losses -32 -27 and realised changes in fair values. Unrealised fair value changes for financial assets available- for-sale are recorded in other comprehensive income and presented in the fair value reserve in equity. The effect of discounting annuities in P&C insurance is disclosed separately. The Loans and receivables -15 -24 provision for annuities is calculated in accordance with actuarial principles taking anticipated inflation and mortality into consideration, and discounted to take the anticipated future return on investments into account. To cover the costs for upward adjustment of annuity provisions Financial assets available-for-sale required for the gradual reversal of such discounting, an anticipated return on investments is Debt securities added to annuity results. Interest income 27 28 Gains/losses - 0 Exchange differences 8 12 Equity securities Gains/losses 1 10 Dividend income 8 3 Total 44 53

Other assets 1 0

Holding, total -2 2

Included in gains/losses from financial assets available for-sale is a net gain of EURm -0 (-10) transferred from the fair value reserve.

EURm 2019 2018 Elimination items between segments -15 -28

Group net investment income, total 2,515 -104

FINANCIAL STATEMENTS 2019 72 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

3 Claims incurred 4 Change in liabilities for insurance

EURm 2019 2018 and investment contracts Claims paid EURm 2019 2018 P&C insurance -3,831 -3,567 Change in unearned premium provision Life insurance P&C insurance -98 -37 Insurance contracts -1,543 -1,315 Life insurance Investment contracts -607 -373 Insurance contracts -2,142 136 Claims paid, gross -5,982 -5,254 Investment contracts -685 -186 Total change in liabilities, gross -2,926 -86 Reinsurers' share P&C insurance 146 107 Reinsurers' share Life insurance, insurance contracts 1 1 P&C insurance 7 2 Reinsurers's share, total 147 108 Group change in liabilities for insurance and investment Claims paid total, net -5,835 -5,146 contracts total, net -2,919 -85

Change in claims provision P&C insurance 280 104 Life insurance, insurance contracts 104 36 Change in claims provision, gross 384 140 5 Staff costs

EURm 2019 2018 Reinsurers' share Wages and salaries -650 -626 P&C insurance -16 -9 Cash-settled share-based payments -10 -3 Life insurance, insurance contracts 0 1 Share-settled share-based payments -8 -7 Reinsurers's share, total -16 -9 Pension costs - defined contribution plans -85 -88 Change in claims provision, net 369 131 - defined benefit plans (Note 30) -15 -8 Other social security costs -128 -123 Group claims incurred, total -5,466 -5,015 Group staff costs, total -897 -855

More information on share-based payments in note 35 Incentive schemes.

FINANCIAL STATEMENTS 2019 73 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

6 Other operating expenses Specification of activity-based operating expenses included in the income statement EURm 2019 2018

IT costs -171 -153 EURm 2019 2018 Other staff costs -28 -30 Claims-adjustment expenses (claims paid) -249 -237 Marketing expenses -55 -57 Acquisition expenses (operating expenses) -501 -483 Depreciation and amortisation -58 -55 Joint administrative expenses for insurance business Depreciation on leases -24 - (operating expenses) -227 -230 Rental expenses *) -44 -68 Administrative expenses pertaining to other technical operations (operating expenses) -45 -34 Change in deferred acquisition costs 6 -3 Asset management costs (investment expenses) -18 -21 Direct insurance comissions -154 -161 Comissions of reinsurance assumed 0 0 Total -1,039 -1,005 Commissions on reinsurance ceded 30 28 Other -154 -128 Group other operating expenses, total -653 -627

*) From leases not recognised in the balance sheet 8 Earnings per share

EURm 2019 2018 Item Other includes e.g. expenses related to communication, external services and other administrative expenses. Earnings per share Profit or loss attributable to the equity holders of the parent company 1,130 1,687 Weighted average number of shares outstanding during the period 555 555 7 Result analysis of If Earnings per share (EUR per share) 2.04 3.04

EURm 2019 2018 Insurance premiums earned 4,388 4,290 Claims incurred -3,000 -2,954 Operating expenses -706 -702 Other insurance technical income and expense -13 -4 Allocated investment return transferred from the non-technical account 16 13 Technical result 685 643 Net investment income account 242 245 Allocated investment return transferred to the technical account -44 -44 Other income and expense 2 3 Operating result 884 848

FINANCIAL STATEMENTS 2019 74 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

9 Financial assets and liabilities

Financial assets and liabilities have been categorised in accordance with IAS 39.9. In the table are also included interest income and expenses, realised and unrealised gains and losses recognised in P/L, impairment losses and dividend income arising from those assets and liabilities. The financial assets in the table include balance sheet items Financial assets and Cash and cash equivalents.

2019 2018 Carrying Interest Gains/ Impairment Dividend Carrying Interest Gains/ Impairment Dividend EURm amount inc./exp. losses losses income EURm amount inc./exp. losses losses income

FINANCIAL ASSETS FINANCIAL ASSETS

Financial assets at fair value Financial assets at fair value through p/l through p/l Derivative financial instruments 82 20 -87 - - Derivative financial instruments 72 -11 -207 - - Financial assets for trading 6,522 103 118 - 23 Financial assets for trading 5,429 89 -99 - 26

Loans and receivables 3,226 14 -5 - - Loans and receivables 3,046 12 -18 - -

Financial assets Financial assets available-for-sale 16,291 247 361 -35 154 available-for-sale 16,507 254 325 -73 162

Group financial assets, total 26,121 384 387 -35 178 Group financial assets, total 25,053 344 1 -73 189

FINANCIAL LIABILITIES FINANCIAL LIABILITIES

Financial liabilities at fair value Financial liabilities at fair value through p/l through p/l Derivative financial instruments 168 - - Derivative financial instruments 169 - -

Other financial liabilities 4,625 -89 77 Other financial liabilities 4,542 -71 53

Group financial liabilities, total 4,794 -89 77 Group financial liabilities, total 4,711 -71 53

FINANCIAL STATEMENTS 2019 75 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

10 Property, plant and equipment

2019 2018 Right-of- Land and Plant and Land and Plant and EURm use assets 1) buildings equipment 2) Total EURm buildings equipment 2) Total At 1 January At 1 January Cost - 121 121 242 Cost 119 122 241 Accumulated depreciation - -4 -77 -80 Accumulated depreciation -2 -81 -83 Net carrying amount Net carrying amount at 1 January - 117 44 162 at 1 January 118 40 158

Carrying amount at 1 January - 117 44 162 Net carrying amount IFRS 16 adoption 140 - - 140 at 1 January 118 40 158 Additions 23 1 17 42 Additions 0 19 19 Disposals - -3 -2 -5 Disposals - -2 -2 Depreciation -24 0 -14 -38 Depreciation 0 -12 -13 Exchange differences 2 0 -1 1 Exchange differences 0 0 -1 Carrying amount Net carrying amount at 31 December 141 115 46 302 at 31 December 117 44 162

At 31 December At 31 December Cost 165 119 136 420 Cost 119 138 257 Accumulated depreciation -24 -4 -90 -118 Accumulated depreciation -2 -94 -96 Net carrying amount Net carrying amount at 31 December 141 115 46 302 at 31 December 117 44 162

1) The Group acts as a lessee in various leases of office premises, vehicles and office equipment. Right-of-use assets relate to lease contracts for large office premises. The Group leases premises mainly for its own use. The expected lease term varies from 2 to 12 years. Most contracts include an option to extend the contract at the term end. Some lease contracts have an option to terminate the contract before the term end. Variable lease payments are generally linked to consumer price indexes. If has signed three office lease contracts that have not yet commenced and therefore are not recognized in the balance sheet. Lease terms vary from 7 to 14 years. The new premises will subsequently replace currently leased premises included into the right-of-use assets. More information on leases in note 31 Other liabilities. 2) Equipment in different segments comprise IT equipment and furniture.

FINANCIAL STATEMENTS 2019 76 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

11 Investment property

EURm 2019 2018 EURm 2019 2018 At 1 January Expenses arising from investment property Cost 771 753 - direct operating expenses arising from investment property generating rental income during the period -22 -28 Accumulated depreciation -75 -71 - direct operating expenses arising from investment property Accumulated impairment losses -32 -29 not generating rental income during the period -2 0 Net carrying amount at 1 January 665 653 Total -23 -28

Net carrying amount at 1 January 665 653 Fair value of investment property at 31 December 833 745 Transfers to property, plant and equipment - -9 Additions 121 64 Fair values for the Group's investment property are entirely determined by the Group based Disposals -101 -35 on the market evidence. The determination and hierarchy of financial assets and liabilities at fair value is disclosed in note 17. Based on the principles of this determination, the investment Depreciation -3 -4 property falls under levels 2 and 3. Impairment losses -1 -3 Exchange differences -1 -1 The premises in investment property for different segments are leased on market-based, irrevocable contracts. The lengths of the contracts vary from those for the time being to those Net carrying amount at 31 December 679 665 for several years.

At 31 December Cost 790 771 Accumulated depreciation -78 -75 Accumulated impairment losses -33 -32 Net carrying amount at 31 December 679 665

Rental income from investment property 50 46

Property rented out under operating lease Non-cancellable minimum rental - not later than one year 46 38 - later than one year and not later than five years 59 57 - later than five years 24 30 Total 129 124

FINANCIAL STATEMENTS 2019 77 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

12 Intangible assets

2019 2018 Customer Customer relations Other relations Other and intangible and intangible EURm Goodwill trademark assets Total EURm Goodwill trademark assets Total At 1 January At 1 January Cost 1,454 602 247 2,303 Cost 1,476 632 210 2,318 Accumulated amortisation - -27 -133 -160 Accumulated amortisation - - -122 -122 Net carrying amount Net carrying amount at 1 January 1,454 575 115 2,143 at 1 January 1,476 632 87 2,196

Net carrying amount Net carrying amount at 1 January 1,454 575 115 2,143 at 1 January 1,476 632 87 2,196 Business acquisitions 26 7 10 43 Additions - - 39 39 Additions - - 46 46 Disposals - -30 - -30 Disposals - -28 0 -28 Depreciation - -27 -11 -38 Depreciation - -27 -15 -43 Exchange differences -23 0 -1 -24 Exchange differences -9 0 0 -9 Net carrying amount Net carrying amount at 31 December 1,454 575 115 2,143 at 31 December 1,471 526 154 2,151 At 31 December At 31 December Cost 1,454 602 247 2,303 Cost 1,471 581 303 2,354 Accumulated amortisation - -27 -133 -160 Accumulated amortisation - -54 -148 -202 Net carrying amount Net carrying amount at 31 December 1,454 575 115 2,143 at 31 December 1,471 526 154 2,151

Goodwill is split between the segments as follows: 2019 2018 If 507 490 Topdanmark 810 811 Mandatum 153 153 Total 1,471 1,454

At the business acquisition of Topdanmark, EURm 95 were allocated to trademark. The useful life of trademark is deemed indefinite and it will not be amortised.

Other intangible assets in all segments comprise mainly IT software.

Depreciation and impairment losses are included in the income statement item Other operating expenses.

FINANCIAL STATEMENTS 2019 78 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Testing goodwill for impairment

Goodwill is tested for impairment in accordance with IAS 36 Impairment of assets. No Forecasts for If, approved by the management, cover years 2020 – 2022. The cash flows beyond impairment losses have been recognised based on these tests. that have been extrapolated using a 2% growth rate. A 2% growth rate for years beyond 2029 has been used for the for Mandatum Life as well, as it is believed to be close to the anticipated For the purpose of testing goodwill for impairment, Sampo determines the recoverable amount inflation in both cases. of its cash-generating units, to which goodwill has been allocated, on the basis of value in use. Sampo has defined these cash-generating units as If Group, Topdanmark Group and Mandatum In Mandatum Life, the recoverable amount exceeds its carrying amount by some EURm 570. Life Insurance Company Ltd (Mandatum hereafter). With the calculation method used, e.g. an increase of about 2% point in the cost of equity combined with a long term 0% growth rate could lead to a situation where the recoverable The recoverable amounts for If and Mandatum have been determined by using a discounted amount of the entity would equal its carrying amount. cash flow model. The model is based on Sampo’s management’s best estimates of both historical evidence and economic conditions such as volumes, interest rates, margins, capital As for the If Group, the management believes that any reasonably possible change in any structure and income and cost development. The value in use model for Mandatum is greatly of these key assumptions would not cause the aggregate carrying amount to exceed the influenced by the long-term development of insurance liabilities, affecting e.g. the required aggregate recoverable amount. solvency capital and thus the recoverable amount. That is why the forecast period is longer for Mandatum, 10 years. The derived cash flows were discounted at the pre-tax rates of the cost of IAS 36 permits determing the recoverable amount by using the fair value less costs to sell. For equity which for If was 8.8% and for Mandatum Life 9.6%. The cost of equity is used as the cost Topdanmark, the valuation of goodwill has been tested on the balance sheet date by using of capital as neither company has principal outstanding. that method. Topdanmark's share price at the acquisition date 30 September 2017 was 247.70 Danish crowns and 328.40 Danish crowns on 31 December 2019. The fair value of Topdanmark on the balance sheet date exceeds its carrying amount in the Group.

FINANCIAL STATEMENTS 2019 79 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

13 Investments in associates

Associates that have been accounted for by the Associates that have been accounted for by the equity method at 31 December 2019 equity method at 31 December 2018

EURm Carrying Interest EURm Carrying Interest Name Domicile amount Fair value*) held % Name Domicile amount Fair value*) held % Nordea Bank Abp Finland 6,712 5,828 19.87 Nordea Bank Abp Finland 7,535 6,255 21.25 NDX Intressenter AB Sweden 267 36.25 NDX Intressenter AB Sweden 289 36.25 Precast Holding Oy Finland 3 20.43 Precast Holding Oy Finland 3 20.43 CAP Group AB Sweden 3 22.00 CAP Group AB Sweden 3 21.98 Svithun Assuranse AS Norway 1 33.00 Svithun Assuranse AS Norway 1 33.00 Digiconsept AS Norway 1 34.00 Digiconsept AS Norway 1 34.00 Boligselskapenes Boligselskapenes Service Senter AS Norway 1 34.00 Service Senter AS Norway 1 34.00 SOS International A/S Denmark 7 25.74 SOS International A/S Denmark 8 25.23 Bornholms Brandforsikring A/S Denmark 9 27.0 0 Bornholms Brandforsikring A/S Denmark 8 27.0 0 Komplementarselskabet Komplementarselskabet Margretheholm ApS Denmark 0 50.00 Margretheholm ApS Denmark 0 50.00 Komplementarselskabet Komplementarselskabet Havneholmen ApS Denmark 0 50.00 Havneholmen ApS Denmark 0 50.00 Margretheholm P/S Denmark 42 50.00 Margretheholm P/S Denmark 34 50.00 Havneholmen P/S Denmark 73 50.00 Havneholmen P/S Denmark 66 50.00 P/S Ejendomsholding P/S Ejendomsholding Banemarksvej Denmark 6 40.00 Banemarksvej Denmark 6 40.00 Komplementarselskabet Komplementarselskabet Banemarksvej ApS Denmark 0 40.00 Banemarksvej ApS Denmark 0 40.00 Carlsberg Byen P/S Denmark 55 22.51 Heap A/S Denmark 0 50.00 Carlsberg Byen P/S Denmark 75 22.51 P/S Ottilia København Denmark 38 50.00 P/S Ottilia København Denmark 0 50.00 Komplementarselskabet Ottilia Komplementarselskabet Ottilia København ApS Denmark 0 50.00 København ApS Denmark 35 50.00 *) Published price quatation *) Published price quatation

FINANCIAL STATEMENTS 2019 80 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Changes in investments in associates

2019 2018 Other Other EURm Nordea associates Total Nordea associates Total At 1 January 7,535 530 8,065 7,578 187 7,765 Share of loss/profit 290 31 321 625 19 644 Valuation loss on dividend distribution of associate shares *) -155 - -155 - - - Additions - 0 0 - 279 279 Disposals -941 0 -941 -585 -3 -588 Changes in the equity of associates -17 -50 -67 -83 50 -33 Exchange differences - -6 -6 - -3 -3 At 31 December 6,712 505 7,217 7,535 530 8,065

*) The valuation loss on dividend distribution of associate shares comprises the valuation difference between the consolidated carrying amount and the fair value of the shares EURm -143, on the date of the distribution, and the recycling of Nordea-related other comprehensive income items to the profit or loss EURm -11.

The carrying amount of investments in associates included goodwill EURm 922 (986), including goodwill from the Nordea acquisition EURm 915 (978).

FINANCIAL STATEMENTS 2019 81 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Financial information on Nordea 14 Financial assets

EURm 2019 2018 Group's financial assets comprise investments in derivatives, financial assets designated as at Assets 554,848 551,408 fair value through p/l, loans and receivables, available-for-sale financial assets and investments in subsidiaries. The Holding segment includes also investments in subsidiaries. Liabilities 523,320 518,507 Goodwill included in the assets 1,969 1,816 The Group uses derivative instruments for trading and for hedging purposes. The derivatives used are foreign exchange, interest rate and equity derivatives. Fair value hedging has been Revenue 8,635 9,172 applied during the financial year in Mandatum. Other comprehensive income items -185 -326

Comprehensive income statement 1,357 2,755 EURm 2019 2018 Dividend income from the associate during the financial year 594 585 If Derivative financial instruments 13 9 Loans and receivables 180 98 Financial assets available-for-sale 10,533 10,646 Reconciliation of Nordea's carrying amount If, total 10,726 10,753 to Nordea's financial information Topdanmark EURm 2019 2018 Derivative financial instruments 27 12 Net assets of Nordea 28,771 30,329 Financial assets at fair value through p/l 6,522 5,429 Sampo's share of 19.87% (21.25) 5,717 6,445 Loans and receivables 368 587 Remaining allocations Topdanmark, total 6,916 6,028 Goodwill 915 978 Trademark and customer relations, net 80 111 Mandatum Total carrying amount 6,712 7,535 Derivative financial instruments 20 7 Financial assets available-for-sale 4,652 4,895

In August 2019 Sampo distributed an extra dividend in a form of 55,517,639 Nordea shares. Mandatum, total 4,671 4,902 As a result, Sampo's ownership of Nordea's shares and voting power decreased from 21.25% to 19.87%. In accordance with IAS 28 Investments in Associates and Joint Ventures, a significant Holding influence needs to be clearly demonstrated, if the investor's ownership of the voting power is less than 20%. Sampo’s management has made a thorough assessment of facts and Derivative financial instruments 22 44 circumstances, and concluded that despite the decrease in the ownership, the significant Financial assets available-for-sale 1,378 1,257 influence continues to exist on 31 December 2019. Investments in subsidiaries 3,767 3,767 At the end of the financial year 2019, Nordea's book value per share 8.34 euro exceeded its Holding, total 5,168 5,069 market value 7.24 euro. As a consequence, Sampo performed an impairment test in accordance with IAS 36 Impairment of Assets where the recoverable amount for Nordea was compared with its carrying amount in the Group.The recoverable amount was defined using a discounted cash Elimination items between segments -4,039 -4,058 flow model, where the cash flows were based on the public information on Nordea and Sampo's estimates of Nordea's future based on this information. Based on the test, the recoverable Group financial assets, total 23,443 22,693 amount exceeded Nordea's carrying amount and no impairment losses were recognised.

FINANCIAL STATEMENTS 2019 82 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Derivative financial instruments 2019 2018 Fair value Fair value Contract/ Contract/ EURm notional amount Assets Liabilities notional amount Assets Liabilities Derivatives held for trading Interest rate derivatives OTC derivatives Interest rate swaps 2,741 53 44 2,750 48 100 Inflation cover 470 0 - - - - Interest options, bought and sold 503 - 68 - - - Total interest rate derivatives 3,714 53 112 2,750 48 100

Foreign exchange derivatives OTC derivatives Currency forwards 7,063 24 57 10,890 21 63 Currency options, bought and sold 154 2 0 414 3 2 Total foreign exchange derivatives 7,217 26 57 11,304 24 65

Equity derivatives OTC derivatives Equity futures 73 0 0 41 - -

Total derivatives held for trading 11,004 79 168 14,096 72 166

Derivatives held for hedging Fair value hedges Currency forwards 364 3 - 364 - 4

Group financial derivatives, total 11,369 82 168 14,460 72 169

Fair value hedges

In Mandatum, fair value hedging is used to hedge a proportion of foreign exchange and interest risk in available-for-sale financial assets. The interest elements of forward contracts have been excluded from hedging relationships in foreign exchange hedges. Net result from exchange derivatives designated as fair value hedges amounted to EURm 6 (12). Net result from hedged risks in fair value hedges of available for sale financial assets amounted to EURm -6 (-12).

FINANCIAL STATEMENTS 2019 83 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Other financial assets 15 Fair values

EURm 2019 2018 2019 2018 Financial assets designated as at fair value through p/l Carrying Carrying EURm Fair value ammount Fair value amount Debt securities 5,840 4,432 Financial assets, group Equty securities 682 726 Financial assets 23,444 23,443 22,693 22,693 Total financial assets designated as at fair value through p/l 6,522 5,158 Investments related to unit-linked contracts 12,975 12,975 10,671 10,671 Other assets 17 17 39 39 Loans and receivables 548 685 Cash and cash equivalents 2,677 2,677 2,361 2,361 Total 39,114 39,113 35,764 35,763 Financial assets available-for-sale Debt securities 12,016 12,888 Financial liablities, group Equity securities 4,275 3,889 Financial liabilities 5,068 4,794 4,793 4,711 Total financial assets available-for-sale 16,291 16,777 Other liabilities 46 46 43 43 Total 5,113 4,839 4,836 4,754 Group other financial assets, total 23,361 22,620

Financial assets available-for-sale include impairment losses EURm 187 (269). In the table above are presented fair values and carrying amounts of financial assets and liabilities. The detailed measurement bases of financial assets and liabilities are disclosed in the Group Accounting policies. Group financial assets, total 23,443 22,693 The fair value of investment securities is assessed using quoted prices in active markets. If published price quotations are not available, the fair value is assessed using discounting method. Values for the discount rates are taken from the market’s yield curve.

The fair value of the derivative instruments is assessed using quoted market prices in active markets, discounting method or option pricing models.

The fair value of loans and other financial instruments which have no quoted price in active markets is based on discounted cash flows, using quoted market rates. The market’s yield curve is adjusted by other components of the instrument, e.g. by credit risk.

The fair value for short-term non-interest-bearing receivables and payables is their carrying amount.

Disclosed fair values are "clean" fair values, i.e. less interest accruals.

FINANCIAL STATEMENTS 2019 84 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

16 Change in fair values of financial assets

Fair value Fair value Financial assets measured at amortized cost EURm 2019 2018 Change There are no significant credit risk concentrations related to financial instruments that meet the Financial assets SPPI test.

Financial assets measured at amortised cost, meeting the SPPI test, by credit risk rating grade: Financial assets measured at amortised cost 2019 Loans and receivables 308 272 36 AA+ - AA- A+ - A- Total Deposits 89 34 55 Loans and receivables 132 49 180 Total 397 306 90 Deposits 15 - 15

Financial assets at fair value through p/l 2018 Equity securities 3,127 2,774 353 BB+ - BB- B+ - B- Total Debt securities 18,131 17,591 540 Loans and receivables 49 49 98 Funds 1,830 1,861 -30 There are no financial instruments that meet the SPPI test, on which the credit risk is not low. Derivatives 82 72 10 Loans guaranteed by mortgages and The associated company Nordea Bank Abp is applying IFRS 9. More information is available in other loans 1 1 0 the Financial Statements of Nordea Bank Abp. Deposits 368 587 -219 The table has been prepared based on current preliminary analysis on business models. The Total 23,539 22,886 654 final classification may change before the implementation on 1 January 2022, when the Group finanalises its more detailed analysis. Financial assets at fair value through p/l related to unit-linked insurance Equity securities 3,466 2,444 1,021 Debt securities 2,612 3,130 -518 Funds 6,377 4,716 1,661 Other 431 364 67 Total 12,886 10,654 2,232

Group financial assets, total 36,822 33,846 2,976

FINANCIAL STATEMENTS 2019 85 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

17 Determination and hierarchy of fair values EURm Level 1 Level 2 Level 3 Total A large majority of Sampo Group's financial assets are valued at fair value. The valuation is FINANCIAL ASSETS AT 31 DECEMBER 2019 based on either published price quatations or valuation techniques based on market observable inputs, where available. For a limited amount of assets the value needs to be determined using other techniques. The financial instruments measured at fair value have been classified into Financial assets at fair value three hierarchy levels in the notes, depending on e.g. if the market for the instrument is active, or if the inputs used in the valuation technique are observable. Derivative financial instruments On level 1, the measurement of the instrument is based on quoted prices in active markets for Interest rate swaps - 53 - 53 identical assets or liabilities. Foreign exchange derivatives - 0 - 0 Equity derivatives - 29 - 29 On level 2, inputs for the measurement of the instrument include also other than quoted prices observable for the asset or liability, either directly or indirectly by using valuation techniques. Total - 82 - 82

In level 3, the measurement is based on other inputs rather than observable market data. The majority of Sampo Group’s level 3 assets are private equity and alternative funds. Assets held for trading Equity securities 483 199 - 682 For private equity funds the valuation of the underlying investments is conducted by the fund Debt securities 5,298 497 44 5,840 manager who has all the relevant information required in the valuation process. The valuation is usually updated quarterly based on the value of the underlying assets and the amount of Total 5,781 696 44 6,522 debt in the fund. There are several valuation methods, which can be based on, for example, the acquisition value of the investments, the value of publicly traded peer companies, the multiple Financial assets designated at fair value based valuation or the cashflows of the underlying investments. Most private equity funds through profit or loss follow the International Private Equity and Venture Capital (IPEV) guidelines which give detailed instructions on the valuation of private equity funds. Deposits - 367 - 367

For alternative funds the valuation is also conducted by the fund managers. Alternative funds often have complicated structures and the valuation is dependent on the nature of the Financial assets related to unit-linked underlying investments. There are many different valuation methods that can be used, for insurance example, the method based on the cashflows of the underlying investments. The operations Equity securities 3,416 3 18 3,437 and valuation of alternative funds are regulated for example by the Alternative Investment Fund Debt securities 918 1,667 26 2,611 Managers Directive (AIFMD), which determines the principles and documentation requirements of the valuation process. Funds 4,686 691 1,000 6,377 Derivative financial instruments - 17 - 17 Other assets - - 120 120 Total 9,019 2,377 1,165 12,561

Financial assets available-for-sale Equity securities 2,066 - 379 2,446 Debt securities 8,483 3,472 61 12,016 Other assets 903 48 879 1,830 Total 11,452 3,520 1,318 16,291

Total financial assests measured at fair value 26,253 7,043 2,528 35,824

FINANCIAL STATEMENTS 2019 86 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

EURm Level 1 Level 2 Level 3 Total EURm Level 1 Level 2 Level 3 Total Other financial assets FINANCIAL LIABILITIES AT 31 DECEMBER 2019

Financial assets at amortised cost Financial liabilities at fair value Loans and receivables - 414 180 595 Derivative financial instruments Group financial assets, total 26,253 7,458 2,708 36,418 Interest rate derivatives - 112 - 112 Foreign exchange derivatives - 57 - 57 Total - 168 - 168

Financial liabilities designated as at fair value through p/l Deposits - - 9 9

Total financial liabilities at fair value - 168 9 178

Other financial liabilities

Subordinated debt securities Subordinated loans 803 467 - 1,270

Debt securities in issue Bonds 3,208 396 - 3,604

Total other liabilities 4,011 863 - 4,874

Group financial liabilities, total 4,011 1,032 - 5,052

FINANCIAL STATEMENTS 2019 87 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

EURm Level 1 Level 2 Level 3 Total EURm Level 1 Level 2 Level 3 Total FINANCIAL ASSETS AT 31 DECEMBER 2018 Other financial assets

Financial assets at fair value Financial assets at amortised cost Loans and receivables - 358 98 456 Derivative financial instruments Interest rate swaps - 48 - 48 Group financial assets, total 23,130 8,086 2,148 33,363 Foreign exchange derivatives - 24 - 24 Total - 72 - 72 FINANCIAL LIABILITIES AT 31 DECEMBER 2018

Financial assets designated at fair value Financial liabilities at fair value through profit or loss Equity securities 533 191 - 725 Derivative financial instruments Debt securities 3,957 695 51 4,703 Interest rate derivatives - 100 - 100 Total 4,490 886 51 5,428 Foreign exchange derivatives - 69 - 69 Total - 169 - 169 Financial assets designated at fair value through profit or loss Deposits - 587 - 587 Financial liabilities designated as at fair value through p/l Deposits - - 11 11 Financial assets related to unit-linked insurance Equity securities 2,433 4 7 2,444 Total financial liabilities measured at fair value - 169 11 180 Debt securities 1,209 1,894 27 3,130 Funds 3,119 918 678 4,716 Other financial liabilities Derivative financial instruments - 5 - 5 Other assets - - 41 41 Subordinated debt securities Subordinated loans 147 321 - 468 Total 6,761 2,822 754 10,337

Debt securities in issue Financial assets available-for-sale Commercial papers 3,547 419 - 3,966 Equity securities 1,683 0 322 2,005 Bonds - 124 - 124 Debt securities 9,289 3,315 13 12,617 Other assets 907 44 909 1,860 Total 3,547 543 - 4,090 Total 11,878 3,359 1,245 16,482 Total other liabilities 3,695 864 - 4,558

Total financial assests measured at fair value 23,130 7,727 2,050 32,907 Group financial liabilities, total 3,695 1,033 11 4,738

FINANCIAL STATEMENTS 2019 88 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Transfers between levels 1 and 2 Sensitivity analysis of fair values

2019 2018 The sensitivity of financial assets and liabilites to changes in exchange rates is assessed on Transfers Transfers Transfers Transfers business area level due to different base currencies. In If, 10 percentage point depreciation of all from level 2 from level 1 from level 2 from level 1 other currencies against SEK would result in an increase recognised in profit/loss of EURm 12 (1) EURm to level 1 to level 2 to level 1 to level 2 and in a decrease recognised directly in equity of EURm -10 (-1). In Topdanmark, 10 percentage depreciation of all other currencies against DKK would result in a decrease recognised in profit/ Financial assets held for trading loss of EURm -5 (0), but would not have an impact on equity. In Mandatum, 10 percentage Debt securities - - 1 58 point depreciation of all other currencies against EUR would result in an increase recognised in profit/loss of EURm 48 (29) and in a decrease recognised directly in equity of EURm -68 (-67). In Holding, 10 percentage point depreciation of all other currencies against EUR would have no Financial assets related to unit-linked impact in profit/loss, but a decrease recognised in equity of EURm -156 (-249). insurance Equity securities 8 0 17 64 The sensitivity analysis of the Group's fair values of financial assets and liabilities in differenct market risk scenarios is presented below. The effects represent the instantaneous effects of a Funds 3 - - 44 one-off change in the underlying market variable on the fair values on 31 December 2019. Total 11 0 17 108 The sensitivity analysis includes the effects of derivative positions. All sensitivities are calculated before taxes. Financial assets available-for-sale Debt securities 582 302 461 477 The debt issued by Sampo plc is not included.

Transfers are based mainly on the changes of trading volume information provided by an Other external service provider. financial Interest rate Equity investments 1% parallel 1% parallel 20% fall in 20% fall in shift down shift up prices prices Effect recognised in profit/ loss 372 -181 -97 -73 Effect recognised directly in equity 285 -258 -656 -195

Total effect 658 -440 -753 -268

FINANCIAL STATEMENTS 2019 89 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

18 Movements in level 3 financial instruments measured at fair value

Total gains/losses Gains/losses Total gains/ recorded in other included in p/l for losses in income comprehensive financial assets at EURm 1 Jan statement income Purchases Sales 31 Dec 31 Dec 2019 FINANCIAL ASSETS AT 31 DECEMBER 2019

Financial assets held for trading Debt securities 51 0 - 7 -14 44 0

Financial assets related to unit-linked insurance Equity securities 7 0 - 11 0 18 0 Debt securities 27 0 - 27 -28 26 -1 Funds 678 13 - 471 -162 1,000 11 713 13 - 510 -191 1,045 11

Financial assets available-for-sale Equity securities 323 0 -1 67 -10 380 -1 Debt securities 13 0 0 138 -91 60 0 Funds 909 3 -33 124 -125 878 -28 1,245 4 -34 329 -226 1,318 -29

Total financial assests measured at fair value 2,009 17 -34 846 -430 2,408 -18

2019 EURm Realised gains/losses Fair value gains and losses Total Total gains or losses included in profit or loss for the financial year 17 -33 -17 Total gains or losses included in profit and loss for assets held at the end of the financial year 16 -33 -18

FINANCIAL STATEMENTS 2019 90 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Total gains/losses Gains/losses Total gains/ recorded in other included in p/l for losses in income comprehensive financial assets at EURm 1 Jan statement income Purchases Sales 31 Dec 31 Dec 2018 FINANCIAL ASSETS AT 31 DECEMBER 2018

Financial assets held for trading Debt securities 77 1 - 14 -40 51 1

Financial assets related to unit-linked insurance Equity securities 6 30 - 7 -35 7 - Debt securities 38 0 - 4 -16 27 - Funds 359 21 - 355 -56 678 21 403 51 - 366 -107 713 21

Financial assets available-for-sale Equity securities 43 1 4 519 -245 323 4 Debt securities 34 0 -1 95 -115 13 0 Funds 674 5 -4 350 -116 909 1 751 6 -1 964 -476 1,245 4

Total financial assests measured at fair value 1,231 58 -1 1,344 -623 2,009 27

2018 EURm Realised gains/losses Fair value gains and losses Total Total gains or losses included in profit or loss for the financial year 57 0 57 Total gains or losses included in profit and loss for assets held at the end of the financial year 27 0 27

FINANCIAL STATEMENTS 2019 91 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

19 Sensitivity analysis of level 3 financial 20 Investments related to unit-linked insurance contracts instruments measured at fair value EURm 2019 2018 Financial assets designated at fair value through p/l 2019 2018 Debt securities 2,611 3,130 Effect of Effect of Equity securities 9,528 6,901 reasonably reasonably Loans and receivables 414 358 possible possible alternative alternative Financial derivative instruments 17 5 Carrying assumptions Carrying assumptions Other 406 277 EURm amount (+ / -) amount (+ / -) Group investments related to unit-linked contracts, total 12,975 10,671

Financial assets

Financial assets available-for-sale Equity securities 370 -74 322 -64 Debt securities 61 -4 13 -1 Funds 887 -177 909 -182 Total 1,318 -255 1,245 -248

The value of financial assets regarding the debt security instruments has been tested by assuming a rise of 1 per cent unit in interest rate level in all maturities. For other financial assets, the prices were assumed to go down by 20 per cent. Sampo Group bears no investment risks related to unit-linked insurance, so a change in assumptions regarding these assets does not affect profit or loss. On the basis of the these alternative assumptions, a possible change in interest levels would cause a descend of EURm -4 (-1) for the debt instruments, and EURm -252 (-246) valuation loss for other instruments in the Group's other comprehensive income. The reasonably possible effect, proportionate to the Group's equity, would thus be 2.1 per cent (2.0).

FINANCIAL STATEMENTS 2019 92 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

21 Deferred tax assets and liabilities

Changes in deferred tax during the financial period 2019

Recognised in comprehensive Recognised in Exchange EURm 1 Jan income statement equity differences 31 Dec Deferred tax assets Tax losses carried forward 15 - - - 15 Pension liabilities 15 -2 13 0 26 Other deductible temporary differences 17 -2 2 0 17 Total 47 -4 16 0 58

Netting of deferred taxes -39

Deferred tax assets in the balance sheet 19

Deferred tax liabilities Depreciation differences and untaxed reserves 185 0 - -1 183 Changes in fair values 126 -1 132 0 257 Other taxable temporary differences 200 -18 3 1 187 Total 510 -19 135 0 627

Netting of deferred taxes -39

Total deferred tax liabilities in the balance sheet 587

FINANCIAL STATEMENTS 2019 93 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Changes in deferred tax during the financial period 2018

Recognised in comprehensive Recognised in Exchange EURm 1 Jan income statement equity differences 31 Dec Deferred tax assets Tax losses carried forward 15 - - - 15 Pension liabilities 20 -6 1 -1 15 Other deductible temporary differences 15 5 -3 0 17 Total 50 -1 -1 -1 47

Netting of deferred taxes -23

Deferred tax assets in the balance sheet 24

Deferred tax liabilities Depreciation differences and untaxed reserves 189 0 0 -4 185 Changes in fair values 271 0 -142 -3 126 Other taxable temporary differences 209 -5 -4 0 200 Total 670 -5 -146 -8 510

Netting of deferred taxes -23

Total deferred tax liabilities in the balance sheet 487

In Sampo plc, EURm 26 of deferred tax asset has not been recognised on unused tax losses. The first losses will expire at the end of fiscal year 2019.

In Mandatum, EURm 2 of deferred tax asset has not been recognised on unused tax losses.

FINANCIAL STATEMENTS 2019 94 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

22 Taxes 23 Components of other comprehensive income

EURm 2019 2018 EURm 2019 2018 Other comprehensive income: Profit before tax 1,541 2,094 Items reclassifiable to profit or loss Exchange differences -39 -97 Tax calculated at parent company's tax rate -308 -419 Available-for-sale financial assets Different tax rates on overseas earnings -16 -19 Gains/losses arising during the year 907 -609 Income not subject to tax 4 4 Reclassification adjustments (IAS 1.93) -320 -150 Expenses not allowable for tax purposes -7 -5 The share of the segretated Suomi portfolio -21 20 Consolidation procedures and eliminations 25 125 Share of associate's other comprehensive income -30 -61 Tax losses for which no deferred tax asset has been recognised 0 -1 Taxes -123 159 Changes in tax rates 0 0 Total items reclassifiable to profit or loss, net of tax 373 -739 Tax from previous years -2 -2 Total -304 -317 Items not reclassifiable to profit or loss Actuarial gains and losses from defined pension plans -58 -6 Taxes 13 1 Total items not reclassifiable to profit or loss, net of tax -45 -5

FINANCIAL STATEMENTS 2019 95 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

24 Tax effects relating to components 25 Other assets of other comprehensive income EURm 2019 2018 2019 2018 Interests 125 131 Before- Net- Before- Net- Assets arising from direct insurance tax of-tax tax of-tax operations 1,431 1,357 EURm amount Tax amount amount Tax amount Assets arising from reinsurance operations 79 59 Items reclassifiable to Settlement receivables 17 39 profit or loss Deferred acquisition costs *) 154 147 Exchange differences -39 - -39 -97 - -97 Assets related to Patient Insurance Pool 71 119 Available-for-sale Other 309 411 financial assets 566 -123 442 -739 159 -580 Share of associate's other Group other assets, total 2,185 2,263 comprehensive income -30 - -30 -61 - -61 Total 496 -123 373 -898 159 -739 Item Other comprise rental deposits, salary and travel advancements and assets held for resale.

Other assets include non-current assets EURm 66 (114).

*) Change in deferred acquisition costs in the period

EURm 2019 2018 At 1 January 147 152 Net change in the period 7 -3 Exchange differences 0 -2 At 31 December 154 147

FINANCIAL STATEMENTS 2019 96 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

26 Liabilities from insurance and investment contracts

P&C liabilities from insurance contracts 2019 2018 EURm Gross Reinsurance Net Gross Reinsurance Net Provision for unearned premiums 2,532 63 2,469 2,422 55 2,367 Provision for claims outstanding 8,411 224 8,187 8,663 237 8,426 Incurred and reported losses 2,516 167 2,348 2,963 194 2,769 Incurred but not reported losses (IBNR) 2,602 48 2,554 2,813 43 2,770 Provisions for claims-adjustment costs 248 - 248 268 - 268 Provisions for annuities and sickness benefits 3,045 8 3,037 2,619 0 2,619 P&C insurance total 10,943 287 10,656 11,084 291 10,793

As Topdanmark and especially If are exposed to various exchange rates, comparing the balance sheet data from year to year can be misleading.

Change in P&C insurance liabilities 2019 2018 EURm Gross Reinsurance Net Gross Reinsurance Net Provision for unearned premiums At 1 January 2,422 55 2,367 2,399 51 2,348 Exchange differences 7 1 8 -15 2 -13 Change in provision 103 7 110 38 1 39 At 31 December 2,532 63 2,469 2,422 55 2,367

2019 2018 EURm Gross Reinsurance Net Gross Reinsurance Net Provision for claims outstanding At 1 January 8,663 237 8,426 8,882 243 8,640 Acquired/disposed insurance holdings 29 - 29 31 - 31 Exchange differences -31 3 -15 -110 3 -113 Change in provision -250 -15 -234 -141 -9 -132 At 31 December 8,411 224 8,187 8,663 237 8,426

FINANCIAL STATEMENTS 2019 97 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

The tables below show the cost trend for the claims for different years. The upper part of the section shows how large a share of this is presented in the balance sheet. More information on tables shows how an estimate of the total claims costs per claims year evolves annually. The lower insurance liabilities in the risk management note 40.

If

Claims cost trend of P&C insurance

Claims costs before reinsurance

Estimated claims cost

EURm < 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Total At the close of the claims year 21,243 2,654 2,735 2,774 2,681 2,661 2,687 2,729 2,766 2,910 3,032 One year later 21,106 2,691 2,842 2,763 2,706 2,654 2,705 2,761 2,803 3,012 Two years later 20,923 2,639 2,838 2,777 2,708 2,661 2,693 2,760 2,798 Three years later 20,746 2,638 2,826 2,768 2,713 2,673 2,669 2,719 Four years later 20,706 2,632 2,801 2,739 2,719 2,678 2,643 Five years later 20,667 2,630 2,786 2,706 2,707 2,648 Six years later 20,782 2,615 2,764 2,687 2,695 Seven years later 20,687 2,608 2,759 2,673 Eight years later 20,636 2,592 2,759 Nine years later 20,489 2,579 Ten years later 20,366

Current estimate of total claims costs 20,366 2,579 2,759 2,673 2,695 2,648 2,643 2,719 2,798 3,012 3,032 47,924 Total disbursed 17,715 2,407 2,570 2,491 2,457 2,379 2,382 2,407 2,410 2,475 1,823 41,517

Provision reported in the balance sheet 2,651 172 189 182 238 268 261 312 388 536 1,209 6,407 of which established vested annuities 1,608 79 75 77 84 85 72 60 52 56 4 2,251

Provision for claims-adjustment costs 221

Total provision reported in the BS of If 6,628

FINANCIAL STATEMENTS 2019 98 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

If

Claims cost trend of P&C insurance

Claims costs after reinsurance

Estimated claims cost

EURm < 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Total At the close of the claims year 19,943 2,527 2,588 2,591 2,635 2,625 2,644 2,673 2,707 2,856 2,970 One year later 19,841 2,570 2,657 2,577 2,660 2,614 2,658 2,682 2,749 2,939 Two years later 19,682 2,529 2,644 2,591 2,664 2,606 2,643 2,678 2,740 Three years later 19,536 2,523 2,639 2,593 2,670 2,617 2,628 2,647 Four years later 19,505 2,521 2,611 2,568 2,673 2,618 2,600 Five years later 19,477 2,519 2,601 2,535 2,662 2,585 Six years later 19,582 2,503 2,577 2,520 2,649 Seven years later 19,486 2,495 2,566 2,505 Eight years later 19,441 2,480 2,554 Nine years later 19,301 2,468 Ten years later 19,178

Current estimate of total claims costs 19,178 2,468 2,554 2,505 2,649 2,585 2,600 2,647 2,740 2,939 2,970 45,836 Total disbursed 16,552 2,297 2,388 2,325 2,417 2,333 2,345 2,351 2,365 2,424 1,792 39,589

Provision reported in the balance sheet 2,627 171 167 180 232 252 255 296 375 515 1,178 6,247 of which established vested annuities 1,607 79 75 77 84 85 72 60 52 56 4 2,251

Provision for claims-adjustment costs 221

Total provision reported in the BS of If 6,468

FINANCIAL STATEMENTS 2019 99 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Topdanmark

Claims cost trend of P&C insurance

Claims costs before reinsurance

Estimated claims cost

EURm < 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Total At the close of the claims year 912 964 859 1,010 890 883 866 793 857 874 One year later 915 983 862 1,038 899 895 863 809 879 Two years later 930 975 864 1,040 896 882 852 811 Three years later 927 974 857 1,036 890 882 849 Four years later 919 965 846 1,023 866 876 Five years later 911 958 844 1,013 853 Six years later 906 953 834 1,001 Seven years later 905 941 832 Eight years later 902 941 Nine years later 907

Current estimate of total claims costs 907 941 832 1,001 853 876 849 811 879 874 8,823 Total disbursed 847 885 763 926 770 760 715 660 651 450 7,427 Discounting 0 0 0 0 0 0 0 0 0 0 1

Provision reported in the balance sheet 60 56 69 75 83 116 135 151 228 424 1,397

Discounting of previous years 353

Total provision reported in the BS of Topdanmark 1,749

FINANCIAL STATEMENTS 2019 100 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Topdanmark

Claims cost trend of P&C insurance

Claims costs after reinsurance

Estimated claims cost

EURm < 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Total At the close of the claims year 855 825 807 855 838 828 804 768 805 841 One year later 861 839 816 865 843 839 807 781 826 Two years later 879 832 818 867 842 829 795 784 Three years later 877 830 812 863 835 827 793 Four years later 871 823 802 850 812 816 Five years later 863 817 799 840 798 Six years later 858 812 789 827 Seven years later 857 800 788 Eight years later 854 799 Nine years later 859

Current estimate of total claims costs 859 799 788 827 798 816 793 784 826 841 8,131 Total disbursed 799 743 719 754 720 714 663 635 613 439 6,799 Discounting 0 0 0 0 0 0 0 0 0 0 1

Provision reported in the balance sheet 60 56 69 73 78 102 130 149 214 402 1,333

Discounting of previous years 353

Total provision reported in the BS of Topdanmark 1,685

FINANCIAL STATEMENTS 2019 101 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Life insurance liabilities from insurance and investment contracts 2019 2018 EURm Gross Reinsurance Net Gross Reinsurance Net Provision for unearned premiums Insurance contracts 4,992 2 4,991 5,043 2 5,040 Investment contracts 25 - 25 24 - 24 Provision for claims outstanding 2,080 1 2,080 2,263 1 2,262 Group liabilities from insurance and investment contracts, total 7,097 2 7,095 7,330 3 7,326

Change in liabilities from insurance contracts Gross Gross Contracts with discretionary Contracts with discretionary EURm participation features EURm participation features At 1 January 2019 7,306 At 1 January 2018 7,791 Premiums 272 Premiums 286 Claims paid -680 Claims paid -678 Expense charge -46 Expense charge -48 Guaranteed interest 157 Guaranteed interest 200 Bonuses 44 Bonuses 1 Other 19 Exchange differences -10 Total life insurance liabilities at 31 December 2019 7,073 Other -237 Total life insurance liabilities at 31 December 2018 7,305

FINANCIAL STATEMENTS 2019 102 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Life insurance liabilities from investment contracts Reconciliation to the consolidated insurance and investment contracts

EURm 2019 2018 EURm 2019 2018 Investment contracts with discretionary P&C insurance 10,943 11,084 participation feature 25 24 Life insurance 7,097 7,330 Group consolidated insurance and The change between financial years is mainly due to the claims paid. investment contracts, total 18,041 18,414

Change in liabilities from life insurance investment contracts Contracts with discretionary 27 Liabilities from unit-linked insurance participation EURm features and investment contracts At 1 January 2019 24 Other 1 EURm 2019 2018 Unit-linked insurance contracts 4,906 4,399 Life insurance liabilities from investment contracts at 31 December 2019, total 25 Unit-linked investment contracts 3,184 2,531 Life insurance liabilities 6,278 4,460 Group liabilities from unit-linked insurance and Contracts with investment contracts, total 14,368 11,390 discretionary participation EURm features At 1 January 2018 26 Other (includes i.e. conversions between different insurance classes) -2 Life insurance liabilities from investment contracts at 31 December 2018, total 24

The liabilities at 1 January and at 31 December include the future bonus reserves and the effect of the reserve for the decreased discount rate. The calculation is based on items before reinsurers' share. More details on the insurance liabilities are presented in the risk management note 40.

Investment contracts do not include a provision for claims outstanding.

Liability adequacy test does not give rise to supplementary claims.

Exemption allowed in IFRS 4 Insurance contracts has been applied to investment contracts with DPF or contracts with a right to trade-off for an investment contract with DPF. These investment contracts have been valued like insurance contracts.

FINANCIAL STATEMENTS 2019 103 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

28 Financial liabilities Topdanmark

The segment financial liabilities include subordinated debts, derivatives, debt securities in issue EURm 2019 2018 and other financial liabilities. Derivative financial instruments (note 14) 91 94

If Subordinated debt securities Subordinated loans Maturity Interest EURm 2019 2018 3 month Derivative financial instruments (note 14) 25 4 Preferred capital note, 2017 (nominal Cibor + value 400 MDKK) bullet 2.75% 53 53 Preferred capital note, 2015 (nominal 2.92% Subordinated debt securities value 500 MDKK) 12/2025 until 2020 67 67 Subordinated loans Maturity Interest 3 month Preferred capital note, 2011 Preferred capital note, 2015 (nominal Cibor (nominal value EURm 110) 30 years 6.00% 110 110 value 850 MDKK) 06/2026 +270 bp 114 114 3 month Total subordinated debt securities 234 234 Preferred capital note, 2016 Stibor + (nominal value 1,500 MSEK) 30 years 2.25% 143 146 Other financial liabilities 9 11 Preferred capital note, 2016 (nominal value 500 MSEK) 30 years 2.42% 48 49 3 month Topdanmark, total financial liabilities 334 339 Preferred capital note, 2016 Stibor + (nominal value 1,000 MSEK) perpetual 2.75% 95 97 Subordinated loans are wholly included in Topdanmark's own funds. Total subordinated debt securities 396 400

If, total financial liabilities 420 405

The loan 2011 was issued with fixed interest rates for the first ten years, after which it becomes subject to variable interest rates. At the point of change, there is the possibility of redemption for all the loans. The loan is utilised for solvency purposes and is approved by the supervisory authorities.

The loan of 1,500 MSEK issued in 2016 is issued with variable interest rate terms. After ten years the margin is increased by one percentage point. It includes terms stating the right of redemption after five years and at any interest payment date thereafter.

The loan of 500 MSEK issued in 2016 is issued with fixed interest rate terms for the first five years. After that period, the loan becomes subject to variable interest rate but it also includes terms stating the right of redemption at this point in time or at any interest payment date thereafter.

The loan issued in 2018 is issued with variable interest rate terms. The loan includes terms stating the right of redemption after five years and at any interest payment date thereafter.

All the loans are listed on the Luxembourg Exchange.

FINANCIAL STATEMENTS 2019 104 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Mandatum Holding

EURm 2019 2018 EURm 2019 2018 Derivative financial instruments (note 14) 15 33 Derivative financial instruments (note 14) 38 37

Subordinated debt securities Debt securities in issue Subordinated loan, 2002 100 100 Commercial papers - 124 Subordinated loan, 2019 249 - Bonds 3,414 3,943 Total subordinated debt securities 349 100 Total 3,414 4,067

Mandatum, total financial liabilities 364 133 Subordinated debt securities Maturity Interest Subordinated loan, 2019 (nominal Mandatum Life issued in 2002 EURm 100 Capital Notes. The loan is perpetual and pays floating value EURm 500) 30 years 3.38% 494 - rate interest. The interest is payable only from distributable capital. The loan is repayable only with the consent of the Insurance Supervisory Authority and at the earliest on 2012 or any interest payment date after that. The loans is wholly subscribed by Sampo Plc. Holding, total financial liabilities 3,946 4,104

In 2019 Mandatum Life issued Solvency II Tier 2 loan of EURm 250. The loan matures on The subordinated loan of the Holding has a fixed interest rate for the first ten years. After that, 4 October, 2049. The loan has a fixed interest rate until the first possible redemption date on the loan becomes subject to variable interest rate but it also includes terms stating the right of 4 October, 2024, whereafter it becomes subject to variable interest rates. redemption at this point in time or at any interest payment date thereafter. The loan is listed on the London Stock Exchange.

The determination and hierarchy of fair values of financial assets and liabilities measured at acquisition cost is disclosed in note 17. According to this determination the subordinated debt securities and bonds are categorised either on level 1 or 2.

EURm 2019 2018 Elimination items between segments -271 -271

Group, total financial liabilities 4,794 4,677

FINANCIAL STATEMENTS 2019 105 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Change in liabilities from financing activities

EURm 1 Jan 2019 Cash flows Exchange differences Other 31 Dec 2019 Commercial papers 124 -124 - 0 0 Bonds 3,943 -27 -8 0 3,908 Total liabilities from financing activities 4,067 -151 -8 0 3,908

EURm 1 Jan 2018 Cash flows Exchange differences Other 31 Dec 2018 Commercial papers 293 -168 - 0 124 Bonds 2,884 1,041 18 - 3,943 Total liabilities from financing activities 3,177 873 18 0 4,067

29 Provisions

EURm 2019 At 1 January 2019 18 Exchange rate differences 0 Additions 7 Amounts used during the period -5 Unused amounts reversed during the period 0 At 31 December 2019 20

Current (less than 1 year) 7 Non-current (more than 1 year) 13 Total 20

EURm 8 (9) of the provision consist of assets reserved for the already implemented or planned development of efficient administrative and claims-adjustment processes and structural changes in distribution channels, resulting in organisational changes that affect all business areas. In addition, the item includes a provision of about EURm 11 (9) for law suits and other uncertain liabilities.

FINANCIAL STATEMENTS 2019 106 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

of salary between 7.5 and 20 income base amounts and 32.5% between 20 and 30 income base 30 Employee benefits amounts. In Norway, life-long old-age pension following a complete service period is payable at a rate of 70% of the pensionable salary up to 12 National Insurance base amounts, together with the estimated statutory old-age pension. Paid-up policies and pension payments from the Swedish plans are normally indexed upwards in an amount corresponding to the change in the consumer price index. However, there is no agreement guaranteeing the value and future Employee benefits supplements in addition to the contractual pension benefit could either rise or fall. If is not responsible for indexation of paid-up policies and/or pension payments from the Norwegian insured plans. Sampo has defined benefit plans in P&C insurance business in Sweden and Norway. The pensions are primarily funded through insurance whereby the insurers establish the In addition to statutory retirement pension insurance, the Group has certain voluntary defined premiums and disburse the benefits. If’s obligation is primarily fulfilled through payment of benefit plans. The voluntary defined benefit plans are intra-Group and included in the insurance the premiums. Should the assets that are attributable to the pension benefits not be sufficient liabilities of Mandatum Life. The amount is negligible and they have no material impact on the to enable the insurers to cover the guaranteed pension benefits, If could be forced to pay Group profit or loss or equity. supplementary insurance premiums or secure the pension obligations in some other way. In addition to insured pension plans, there are also unfunded pension benefits in Norway for which If is responsible for ongoing payment.

Employee benefit obligations of If To cover the insured pension benefits, the related capital is managed as part of the insurers’ management portfolios. In such management, the characteristics of the investment assets are analyzed in relation to the characteristics of the obligations, in a process known as Asset EURm 2019 2018 Liability Management. New and existing asset categories are evaluated continuously in order to Present value of estimated pension obligation, including diversify the asset portfolios with a view to optimizing the anticipated risk-adjusted return. Any social costs 330 268 surplus that arises from management of the assets normally accrues to If and/or the insured and there is no form of transfer of the asset value to other members of the insurance collective. Fair value of plan assets 231 217 Net pension obligation recognised in the balance sheet 99 51 The insurers and If are jointly responsible for monitoring the pension plans, including investment decisions and contributions. The pension plans are essentially exposed to similar material risks regarding the final amount of the benefits, the investment risk associated with the plan assets The main Swedish defined-benefit pension plan is closed to new employees born in 1972 or later. and the fact that the choice of discount interest rate affects their valuation in the financial The corresponding Norwegian pension plan consists solely of active people employed prior to statements. 2006 and born 1957 and earlier. When applying IAS 19, the pension obligation and the pension cost attributed to the fiscal For both countries, the pension benefits referred to are old-age pension and survivors’ period are calculated annually using the Projected Unit Credit method. The calculation of pension. A common feature of the defined-benefit plans is that the employees and survivors the defined benefit obligation is based on future expected pension payments and includes encompassed by the plans are entitled to a guaranteed pension that depends on the employees’ yearly updated actuarial assumptions such as salary growth, inflation, mortality and employee service period and pensionable salary at the time of retirement. The dominating benefit is the turnover. The expected pension payments are then discounted to a present value using a old-age pension, which refers in part to temporary pension before the anticipated retirement discount rate set with reference to AAA and AA corporate bonds issued in local currency, age and in part to a life-long pension after the anticipated retirement age. including mortgage-backed bonds, as at mid December. The discount rates chosen in Sweden and Norway take into account the duration of the company’s pension obligations in The retirement age for receiving premature pension is normally 62 years in Sweden and each respective country. After a deduction for the plan assets, a net asset or a net liability is normally 65 years in Norway. In Sweden, premature old-age pension following a complete recognized in the balance sheet. service period is payable at a rate of approximately 65% of the pensionable salary and applies to all employees born in 1955 or earlier and who were covered by the insurance sector’s collective The following tables contain a number of material assumptions, specifications of pension costs, bargaining agreement of 2006. In Norway, premature old-age pension following a complete assets and liabilities and a sensitivity analysis showing the potential effect on the obligations of service period is payable at a rate of approximately 70% of the pensionable salary and applies to reasonable changes in those assumptions as at the end of the fiscal year. all employees born in 1957 or earlier and who were employed by If in 2013. The carrying amounts have been stated including special payroll tax in Sweden (24.26%) and a The anticipated retirement age in connection with life-long pension is 65 years for Sweden and corresponding fee in Norway (14.1%-19.1%). 67 years for Norway. In Sweden, life-long old-age pension following a complete service period is payable at a rate of 10% of the pensionable salary between 0 and 7.5 income base amounts, 65%

FINANCIAL STATEMENTS 2019 107 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Specification of employee benefit obligations by country 2019 2018 Sweden Norway Total Sweden Norway Total Recognised in income statement and other comprehensive income Current service cost 5 2 6 5 2 7 Past service cost - - - 0 - 0 Interest expense on net pension liability 0 1 1 0 1 1 Total in income statement 5 2 8 5 3 8 Remeasurement of the net pension liability 54 3 57 9 -3 6 Total in comprehensive income statement 59 6 65 14 0 14

Recognised in balance sheet Present value of estimated pension liability, including social costs 275 55 330 210 58 268 Fair value of plan assets 202 28 231 186 31 217 Net liability recognised in balance sheet 72 27 99 24 28 51

Distribution by asset class

Debt instruments, level 1 45% 49% 44% 51% Debt instruments, level 2 0% 12% 0% 13% Equity instruments, level 1 22% 13% 23% 14% Equity instruments, level 3 10% 1% 9% 2% Property, level 3 11% 14% 11% 14% Other, level 1 1% 9% 0% 6% Other, level 2 5% 2% 6% 1% Other, level 3 6% 0% 7% 0%

FINANCIAL STATEMENTS 2019 108 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

The following actuarial assumptions have been used for the calculation of defined benefit pension plans in Norway and Sweden: Sweden Sweden Norway Norway 31 Dec 2019 31 Dec 2018 31 Dec 2019 31 Dec 2018 Discount rate 1.50% 2.50% 2.50% 2.75% Future salary increases 2.75% 2.75% 3.00% 3.00% Price inflation 2.00% 2.00% 2.00% 2.00% Mortality table DUS14 FFFS 2007:31 +1 year K2013 K2013 Average duration of pension liabilities 22 years 21 years 12 years 12 years Expected contributions to the defined benefit plans during 2020 and 2019 9 9 2 2

2019 2018 Sensitivity analysis of effect of reasonably possible changes Sweden Norway Total Sweden Norway Total Discount rate, +0.50% -33 -3 -37 -25 -4 -29 Discount rate, -0.50% 39 4 42 29 4 33 Future salary increases, +0.25% 10 0 10 8 0 8 Future salary increases, -0.25% -9 0 -9 -7 0 -7 Expected longevity, +1 year 13 1 15 9 1 10

2019 2018 EURm Funded plans Unfunded plans Total Funded plans Unfunded plans Total Analysis of the employee benefit obligation Present value of estimated pension liability, including social costs 302 28 330 240 28 268 Fair value of plan assets 231 - 231 217 - 217 Net pension liability recognised in the balance sheet 71 28 99 23 28 51

FINANCIAL STATEMENTS 2019 109 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Analysis of the change in net liability 31 Other liabilities recognised in the balance sheet EURm 2019 2018

EURm 2019 2018 Liabilities arising out of direct insurance operations 239 251 Pension liabilities: Liabilities arising out of reinsurance operations 35 33 At the beginning of the year 268 268 Liabilities related to Patient Insurance Pool 69 174 Earned during the financial year 6 7 Tax liabilities 176 139 Costs pertaining to prior-year service - 0 Premium taxes 68 62 Interest cost 7 7 Settlement liabilities 46 43 Actuarial gains (-)/losses (+) on financial assumptions 61 14 Interests 42 46 ) Actuarial gains (-)/losses (+), experience adjustments 4 - Leases * 137 - Exchange differences on foreign plans 2 0 Prepayments and accrued income 231 235 Benefits paid -2 -8 Other 446 271 Settlements -15 -20 Group other liabilities, total 1,489 1,254 Defined benefit plans at 31 December 330 268 Item Other includes e.g. witholding taxes, social expenses related to Workers Compensation insurance policies and employee benefits and unpaid premium taxes. Reconciliation of plan assets: At the beginning of the year 217 211 The non-current share of other liabilities is EURm 70 (113). Interest income 5 6 *) The total effect of leasese on the statement of cashflows was EURm -25. Non-cash flow additions Difference between actual return and calculated interest income 9 8 from IFRS 16 leases to the balance sheet items was EURm 27. Contributions paid 14 15 Exchange differences on foreign plans -3 -7 Benefits paid -12 -17 Plan assets at 31 December 231 217 Reconciliation of transition to IFRS 16 Leases

The Group as a lessee

The Group applied the modified retrospective approach allowed by the standard from 1 January Other short-term employee benefits 2019. The comparison year is not disclosed and the right-of-use asset equals the lease liability at the time of the transition. The ROU asset is depreciated on straight-line basis over the lease period. There are other short-term staff incentive programmes in the Group, the terms of which vary according to country, business area or company. Benefits are recognised in the profit or loss for The Group does not apply IFRS 16 to short-term under 12 months leases, or to leases for which the year they arise from. An estimated amount of these short-term incentives, social security the underlying asset is of low-value. costs included, for 2019 is EURm 56.

FINANCIAL STATEMENTS 2019 110 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

The specification of IFRS 16 lease liabilities 32 Contingent liabilities and commitments at the time of transition

EURm EURm 2019 2018 Off-balance sheet liabilities at 31 December 2018 156 Off-balance sheet items Off-balance sheet leases -11 Guarantees 1,263 1,144 Prepaid rents -5 Investment commitments 6 10 Effect from discounting -6 IT acquisitions 6 5 Lease liabilities at 1 January 2019 134 Other irrevocable commitments 23 98 Total 1,299 1,257 The lease liabilities are discounted at a company level. The applied discount rates vary between -0.04–2.2%. Assets pledged as collateral for liabilities or contingent liabilities

EURm 2019 2018 2019 2018 Items recogised in the p/l from lease liabilities Assets Liabilities/ Assets Liabilities/ Interest expenses -2 - EURm pledged commitments pledged commitments Expenses from short-term and low-value lease liabilities -10 - Assets pledged as collateral Investments 225 0 209 152 Cash and cash equivalents 2 0 - - Total 227 0 209 152

EURm 2019 2018 Assets pledged as security for derivative contracts, carrying value Investment securities 13 13 Cash and cash equivalents 276 182 Total 289 195

FINANCIAL STATEMENTS 2019 111 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

EURm 2019 2018 33 Equity and reserves Other contingent liabilities Contract liabilities - 53 Adjustments to VAT liabilities 18 14 Equity (1,000 shares) Other liabilities - 2

Total 18 69 2019 2018

Other contingent liabilities belong to Topdanmark. Equity (1,000 shares) 555,352 555,352

The subsidiary If P&C Insurance Ltd provides insurance with mutual undertakings within the At the end of the financial year, the mother company or other Group companies held no shares Nordic Nuclear Insurance Pool, Norwegian Natural Perils’ Pool and the Dutch Terror Pool. in the parent company.

In connection with the transfer of property and casualty insurance business from the Skandia group to the If Group as of March 1, 1999, If P&C Holding Ltd and If P&C Insurance Ltd issued a guarantee for the benefit of Försäkringsaktiebolaget Skandia (publ.) whereby Reserves and retained earnings the aforementioned companies in the If Group mutually guarantee that companies in the Skandia group will be indemnified against any claims or actions due to guarantees or similar commitments made by companies in the Skandia group within the property and casualty Legal reserve insurance business transferred to the If Group. The legal reserve comprises the amounts to be transferred from the distributable equity according to the articles of association or on the basis of the decision of the AGM. If P&C Insurance Holding Ltd and If P&C Insurance Ltd have separately entered into contracts with Försäkringsaktiebolaget Skandia (publ.) and Tryg-Baltica Forsikrings AS whereby Skandia and Tryg-Baltica will be indemnified against any claims attributable to guarantees issued by Invested unrestricted equity Försäkringsaktiebolaget Skandia (publ.) and Vesta Forsikring AS, on behalf of Skandia Marine The reserve includes other investments of equity nature, as well as issue price of shares to an Insurance Company (U.K.) Ltd. (now Marlon Insurance Company Ltd.) in favor of the Institute extent it is not recorded in share capital by an express decision. of London Underwriters. Marlon Insurance Company Ltd. was disposed during 2007, and the purchaser issued a guarantee in favour of If for the full amount that If may be required to pay under these guarantees. Other components of equity Other components of equity include fair value changes of financial assets available for sale and If P&C Insurance Company Ltd has outstanding commitments to private equity funds totalling derivatives used in cash flow hedges, and exchange differences. EURm 5, which is the maximum amount that the company has committed to invest in the funds. Capital will be called to these funds over several years as the funds make investments. Changes in the reserves and retained earnings are presented in the Group's statement of In addition, If P&C Insurance Ltd has outstanding commitments to borrowers totalling changes in equity. approximately EURm 4.

With respect to certain IT systems If and Sampo use jointly, If P&C Insurance Holding Ltd has undertaken to indemnify Sampo for any costs caused by It that Sampo may incur in relation to the owners of the systems.

Sampo Group's Danish companies and Topdanmark Group's companies are jointly taxed, with Topdanmark A/S being the management company. Pursuant to the specific rules on corporation taxes etc. in the Danish Companies Act, the companies are liable for the jointly taxed companies and for any obligations to withhold tax from interests, royalties and dividend for companies concerned.

In connection with implementation of a new customer and core system, Topdanmark Forsikring A/S has undertaken to give support towards specific suppliers to fulfill Topdanmark EDB IV ApS' obligations in accordance with the contracts.

FINANCIAL STATEMENTS 2019 112 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

34 Related party disclosures Related party transactions of the key management

The key management does not have any loans from the Group companies. Key management personnel Associates The key management personnel in Sampo Group consists of the members of the Board of Directors of Sampo plc and Sampo Group’s Executive Committee, and the entities over which the members of the key management personnel have a control. Outstanding balances with related parties/Associate Nordea

EURm 2019 2018 Key management compensation Assets 2,338 2,461 Liabilities 53 48 EURm 2019 2018 Short-term employee benefits -9 -9 The Group's receivables from Nordea coprise mainly long-term investments in bonds and Post employment benefits -3 -2 deposits. In addition, the Group has several on-going derivative contracts related to the Group's risk management of investments and liabilities. Other long-term benefits -7 -9 Total -19 -20

Short-term employee benefits comprise salaries and other short-terms benefits, including profit- sharing bonuses accounted for for the year, and social security costs.

Post employment benefits include pension benefits under the Employees’ Pensions Act (TyEL) in Finland and voluntary supplementary pension benefits.

Other long-term benefits consist of the benefits under long-term incentive schemes accounted for for the year (see Note 35).

FINANCIAL STATEMENTS 2019 113 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

35 Incentive schemes 2014 I 2014 I/2 2017 I 2017 I/2 17 Sep 17 Sep 14 Sep 14 Sep Terms approved *) 2014 2014 2017 2017 Granted (1,000) 31 Dec 2016 4,211 62 - - Long-term incentive schemes 2014 I - 2017 II Granted (1,000) 31 Dec 2017 2,874 62 4,092 - Granted (1,000) 31 Dec 2018 1,411 43 3,978 85 The Board of Directors of Sampo plc has decided on the long-term incentive schemes 2014 I - Granted (1,000) 31 Dec 2019 22 3,948 85 2017 II for the management and key employees of Sampo Group. The Board has authorised the CEO to decide who will be included in the scheme, as well as the number of calculated incentive units granted for each individual used in determining the amount of the incentive reward. In End of performance period I 30% Q2-2017 Q2-2018 Q2-2020 Q2-2021 the schemes, the number of calculated incentive units granted for the members of the Group End of performance period II 35% Q2-2018 Q2-2019 Q2-2021 Q2-2022 Executive Committee is decided by the Board of Directors. Some 120 persons were included in the schemes at the end of year 2019. End of performance period III 35% Q2-2019 Q2-2020 Q2-2022 Q2-2023 Payment I 30% 9-2017 9-2018 9-2020 9-2021 The amount of the performance-related bonus is based on the value performance of Sampo's Payment II 35% 9-2018 9-2019 9-2021 9-2022 A share and on the insurance margin (IM) and on Sampo's return on the risk adjusted capital (RoCaR). The value of one calculated incentive unit is the trade-weighted average price of Payment III 35% 9-2019 9-2020 9-2022 9-2023 Sampo's A-share at the time period specified in the terms of the scheme, and reduced by the starting price adjusted with the dividends per share distributed up to the payment date. The pre-dividend starting prices vary between eur 38.26–44.10. The maximum value of one Price of Sampo A at terms approval ) incentive unit varies between eur 57.26–63.10, reduced by the dividend-adjusted starting price. date * 37.22 37.22 44.02 44.02 In all the schemes, the incentive reward depends on two benchmarks. If the IM is 6 per cent Starting price **) 38.26 43.38 43.81 44.10 or more, the IM-based reward is paid in full. If the IM is between 4–5.99 per cent, half of the Dividend-adjusted starting price incentive reward is paid. No IM-related reward will be paid out, if the IM stays below these. In at 31 December 2019 32.91 37.79 40.68 addition, the return on the risk adjusted capital is taken into account. If the return is at least risk free return + 4 per cent, the RORAC-based incentive reward is paid out in full. If the return is risk free return + 2 per cent, but less than risk free return + 4 percent, the payout is 50 per cent. If Sampo A closing price at the return stays below these benchmarks, no RORAC-based reward will be paid out. 31 December 2019 38.91

Each plan has three performance periods and incentive rewards are settled in cash in three installments. The employee shall authorise Sampo plc to buy Sampo's A-shares with 50 per cent Total intrinsic value, EURm 0 7 0 (scheme 2017 I) or 60 percent (scheme 2014 I) of the amount of the reward after taxes and other comparable charges. The shares are subject to transfer restrictions for three years from the day of payout. A premature payment of the reward may occur in the event of changes in the group Total debt 7 structure or in the case of employment termination on specifically determined bases. The fair Total cost for the financial period, value of the incentive schemes is estimated by using the Black-Scholes pricing model. EURm (incl. social costs) 12

*) Grant dates vary **) Trade-weighted average for ten trading days from the approval of terms

FINANCIAL STATEMENTS 2019 114 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Long-term incentive scheme of Topdanmark

Topdanmark's share option scheme is for its Executive Board and senior executives. The strike The option scheme requires employment during the whole year of the allocation. Options are price has been fixed at 110% of the market price on the last trading date in the prior financial allocated at beginning of year and in connection with resignation in the year of allocation a year (average of all trades). The options may be exercised 3–5 years subsequent to the granting. proportional deduction in the number of allocated options is made. The scheme is settled by shares. The tabels below show option holder's standing at the year end.

Strike price Executive board Senior executives Resigned Total Total number of options (1,000)

At 1 January 2019 28 139 788 365 1,293 Granted 45 59 207 10 276 Transferred 0 -113 113 0 Exercised 25 -20 -235 -222 -477 Forfeited 43 0 0 -7 -7 At 31 December 2019 31 178 648 260 1,086

At 1 January 2018 27 192 986 266 1,444 Granted 40 49 238 24 311 Transferred -33 -163 195 0 Exercised 25 -69 -274 -82 -425 Forfeited 29 - - -37 -37 At 31 December 2018 28 139 788 365 1,293

Per granting 2015, exercise period January 2018–2020 25 11 0 20 32 2016, exercise period January 2019–2021 24 12 24 38 74 2017, exercise period January 2020–2022 22 55 256 105 415 2018, exercise period January 2021–2023 35 41 175 79 295 2019, exercise period January 2022–2024 43 59 193 18 269

FINANCIAL STATEMENTS 2019 115 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Executive board Senior executives Resigned Total Average market price on date of exercise 2019 44 Average market price on date of exercise 2018 39

Fair value of granting 2019 0 1 0 1 Fair value of granting 2018 0 1 0 1

Fair value at 31 December 2019 2 9 4 15 Fair value at 31 December 2018 2 10 5 17

The fair value of the granting for the year has been calculated using the Black and Scholes model assuming a share price of EUR 41 (36) . The interest rate corresponds to the zero coupon rate based on the swap curve on 31 December of the previous year. Future volatility is assumed to be 22 per cent and the average life of the options approximately 4 years. The volatility based on previous years' volatility is still the best estimate of the future volatility. The strike prices are adjusted by dividend distribution for outstanding options.

At 31 December 2019, there were 106,000 options (163,000) which could be exercised.

FINANCIAL STATEMENTS 2019 116 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

36 Auditors’ fees 38 Investments in subsidiaries

Name Group holding % Carrying amount EURm 2019 2018 If P&C Insurance Holding Ltd 100 1,886 Auditing fees -3 -2 If P&C Insurance Ltd 100 1,581 Ernst & Young -1 -1 If P&C Insurance AS 100 42 Other -1 -2 Support Services AS 100 0 Other fees 0 -1 If Livförsäkring Ab 100 7 Ernst & Young 0 0 Vertikal Helseassistanse AS 100 33 Other 0 0 If Services AB 100 1 Total -3 -3 Topdanmark A/S 48.24* 1,398 Topdanmark Kapitalforvaltning A/S 100 14 Topdanmark Forsikring A/S 100 839 Topdanmark Liv Holding A/S 100 304 37 Legal proceedings Topdanmark Livsforsikring A/S 100 489 Topdanmark Ejendom A/S 100 426 There are a number of legal proceedings against the Group companies outstanding on Mandatum Life Insurance Company Ltd 100 484 31 December 2019, arising in the ordinary course of business. The companies estimate it unlikely Mandatum Life Services Ltd 100 4 that any significant loss will arise from these proceedings. Mandatum Life Investment Services Ltd 100 2 Saka Hallikiinteistöt GP Oy 100 0 Mandatum Life Vuokratontit I GP Oy 100 0 Mandatum Life Fund Management S.A. 100 5 If IT Services A/S 100 0 Sampo Capital Oy 100 1 *) The Group's ownership of votes.

The table excludes property and housing companies accounted for in the consolidated accounts.

39 Events after the balance sheet date

In the meeting of 6 Feb 2020, the Board of Directors decided to propose at the Annual General Meeting on 23 April 2020 a dividend distribution of EUR 2.20 per share, or total EUR 1,221,774,070.00, for 2019. The dividends to be paid will be accounted for in the equity in 2020 as a deduction of retained earnings.

FINANCIAL STATEMENTS 2019 117 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

40 Risk Management Disclosure 2019

Sampo Group’s Risks and Core External drivers behind such changes are varied, on the amount and structure of actual capital base, if Risk Management Activities including for instance general economic development, deemed prudent in the existing business environment. changes in commonly shared values, developments Sampo Group companies operate in business areas where in the institutional and physical environment and Corporate Responsibility as a Business Risk Driver specific features of value creation are the pricing of risks technological innovations. Because external drivers are The issues related to corporate responsibility are changing and the active management of risk portfolios in addition inter-connected, the customer preferences and demand the preferences and values of Sampo Group companies’ to sound client services. Hence common risk definitions can change unpredictably and there may be a need to stakeholders and, as a result, the operating and competi- are needed as a basis for business activities. change regulations as well. In case the company’s internal tive environment is also changing in different ways. The understanding of needed changes or willingness and Group companies operate mainly in the Nordic countries, Group’s Risks ability to act accordingly is inadequate and competitors which are characterized by an inherent respect for human In Sampo Group, the risks associated with business are more able to meet clients’ and regulation’s altered rights, high transparency, and low levels of corruption activities fall into three main categories as shown in expectations, the company is highly exposed to business and bribery. There is high compliance with labor rights, the picture Classification of Risks in Sampo Group: risk. health and environmental legislation and freedom of business risks, reputational risk and risks inherent in the speech and association. These themes are also inherent in business operations. The first two risk classes are only Due to the predominantly external nature of the drivers the operations of all Sampo Group companies. Managing briefly described in this Risk Management Disclosure as and development in the competitive environment, the economic, social, and environmental impacts and the focus is on the third risk class. managing business risks is the responsibility of the stakeholder relationships of Sampo Group businesses executive level senior management. Proactive strategic is increasingly important. Investors and governmental Business Risks decision making is the central tool in managing business authorities are putting an increasing focus on corporate Business risk is the risk of losses due to changes in risks, which relate to the competitive advantage. The responsibility, but also consumers and employees are the competitive environment and/or lack of internal maintenance of internal operational flexibility – i.e. the emphasizing these topics when choosing a brand or a operational flexibility. Unexpected abrupt changes or ability to adjust the business model and cost structure company. already identified, but internally neglected trends can when needed – is also an efficient tool in managing cause larger than expected fluctuations in profitability business risks. The key corporate responsibility related risk drivers for when volumes, margins, costs and capital charges change Sampo Group can be divided into four main areas: and in the long run they may also endanger the existence Business risks do not have the regulatory capital charge, of Sampo Group’s business models. although they may be a material source of earnings Responsible business management and practices are volatility. Because of this, business risk may have an effect fundamental to Sampo Group companies’ operations.

FINANCIAL STATEMENTS 2019 118 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Good governance in Sampo Group means effective policies not only because it is stipulated by law, but also because it The strategies used include for example ESG integration, and management practices, which provide assurance lays the foundation for sustainable business performance. sector-based screening, norm-based screening, and active that the Group companies and their business partners, Diversity and equality are key focus areas for Sampo ownership. Sampo Group is also a signatory of the United such as suppliers in claims handling, comply with laws, Group companies, which are committed in providing Nations Principles for Responsible Investment (“PRI”). regulations and generally accepted principles on human a non-discriminatory, open and agreeable working rights, labor rights, environment, anti-money laundering, environment where everyone is treated fairly and equally. Environmental issues and climate change are factors counter-terrorism financing and anti-corruption and Risks related to these themes are managed for example by affecting Sampo Group’s businesses via investment bribery. Further, it comprises comprehensive information having strong internal policies, conducting organizational operations, but effects are also recognized in insurance security governance systems, cybersecurity preparedness development programs, and offering employees training, operations in an increasing manner. Sampo Group com- and personal data protection activities. Additionally, interesting career opportunities and attractive remunera- panies help customers to manage risks and they provide responsible business practices require being attentive of tion packages. customers support when accidents occur. By providing the risks relating to inappropriate customer advice and customers with guidance on how to prevent losses, the product sales, lack of clarity on conditions, prices and fees, Responsible investment management and operations are Group companies help customers to reduce risks and and errors in claims handling and complaint processes. important in managing long-term investment risks and in economic costs, and at the same time to protect the Sales and marketing practices’ focus is on meeting the mitigating potential adverse impacts on the Group’s repu- environment. Natural catastrophes and extreme weather demands and needs of the customer and providing the tation. Therefore, Sampo Group companies take environ- conditions, on the other hand, are risk factors affecting customer with the information necessary for them to mental, social and governance (“ESG”) issues into account the financial position and results of non-life insurers. make well-informed decisions on their insurance coverage when assessing the security, quality, liquidity, profitability Since climate change could increase the frequency and/or needs. and availability of investments. Investment opportunities severity of natural catastrophes, Sampo Group companies are carefully studied before any investments are made and have conducted sensitivity analyses, using scenarios Responsible corporate culture includes factors relating ESG issues are considered along with other factors that where the severity of natural catastrophes is assumed to to the work environment, diversity, equality, employee might affect the risk-return ratio of separate investments. increase. As a potential side effect, climate change could well-being, employee engagement, professional ESG issues have an impact on the long-term performance, also result in large migrations or prolonged concentrations development, and talent attraction and retention. Sampo risk and value of all companies. Taking these issues into of people and animals where deceases can be transmitted Group companies want to provide customers with the consideration in the investment process is an important or the change in environment could create new versions of best service in all situations. Here skilled and motivated mean to improve the risk-return profile of investments, known diseases. These risks are managed effectively with employees is an essential success factor. Losing talent or and it is a critical success factor of investment activities. reinsurance programs. being perceived as an unattractive employer would pose Depending on the asset class, Sampo uses different large risks for the businesses. Therefore, Sampo Group ESG strategies to ensure the effective consideration and companies strive to ensure a sound work environment, management of investment risks arising from ESG issues.

FINANCIAL STATEMENTS 2019 119 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Reputational Risk Reputational risk refers to the risk that adverse publicity graph Classification of Risks in Sampo Group. As the roots Managing stakeholder relationships means satisfied regarding the company’s business practices or associa- of reputational risk are varied, the tools to prevent it must customers, professional staff, good co-operation with tions, whether accurate or not, causes a loss of confidence be diverse and embedded within the corporate culture. authorities and the trust and approval of the environ- in the integrity of the institution. Reputational risk is These are reflected in how Sampo deals with environ- ment. These contribute to a key success factor of the often a consequence of a materialized operational or mental issues and its core stakeholders (i.e. customers, company, its reputation. compliance risk and often manifests as a deterioration of personnel, investors, other co-operation partners, tax reputation amongst customers and other stakeholders. authorities and supervisory authorities) and how Sampo Reputational risk is related to all activities shown in the Group has organized its Corporate Governance system.

Classification of Risks in Sampo Group

External drivers

Non-life insurance Life insurance Investment Counterparty Operational Business underwriting risks underwriting risks portfolio market default risks risks risks risks Premium and Biometric risks Derivative Processes Volumes Catastrophe risks Policyholder Interest rate risk counterparty Personnel Margins Reserve risks behavior risks Currency risk Reinsurance Systems Number of Clients counterparty Expense risk Spread risk External events Equity risk Legal risk Other risks Compliance risk

Concentration risk Concentration risk Concentration risk Concentration risk Concentration risk Concentration risk

ALM risks

Earnings risks / Reputational risk capital charge Earnings risks / no capital charge Consequential risks / capital charge Negative impact on financial results, capitalization and long-term profitability Consequential risks / no capital charge

FINANCIAL STATEMENTS 2019 120 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Risks Inherent in Business Operations understanding of expected cash flows and their variance Core Risk Management Activities In its underwriting and investment operations, Sampo within each of the company’s activities. In addition, a To create value for all stakeholders in the long run, Sampo Group is consciously taking certain risks in order to thorough understanding of how the market values of Group companies must have the following forms of capital generate earnings. These earnings risks are carefully assets and liabilities may fluctuate at the total balance in place: selected and actively managed. Underwriting risks are sheet level under different scenarios is needed. These priced to reflect their inherent risk levels and the expected balance sheet level risks are commonly defined as Asset • Financial flexibility in the form of adequate capital and return of investments is compared to the related risks. and Liability Management (“ALM”) risks. In addition to liquidity. interest rate, currency and liquidity risk, inflation risk and • Good technological infrastructure. Successful management of underwriting risks and invest- risks relating to GDP growth rates are central ALM risks • Intellectual capital in the form of comprehensive ment portfolio market risks is the main source of earnings in Sampo Group. The ALM risks are one of the focus areas proprietary actuarial data and analytical tools to for Sampo Group companies. Day-to-day management of of senior management because of their relevance to risks convert this data to information. these risks, i.e. maintaining them within given limits and and earnings in the long run. • Human capital in the form of skilful and motivated authorizations is the responsibility of the business areas employees. and the investment unit. In general, concentration risk arises when the company’s • Social and relationship capital in the form of good risk exposures are not diversified enough. When this is relationships with society and clients to understand the Some risks, such as counterparty default risks and opera- the case, an individual extremely unfavourable claim or changing needs of different stakeholders. tional risks presented in the graph Classification of Risks financial market event, for instance, could threaten the in Sampo Group are indirect repercussions of Sampo’s solvency of the company. At the company level, these resources are continuously normal business activities. They are one-sided risks, developed. They are in use when the following core which in principle have no related earnings potential. Concentrations can evolve within separate activities activities related to risk pricing, risk taking, and active Accordingly, the risk management objective is to mitigate – large single name or industry specific insurance or management of risk portfolios are conducted. these risks efficiently rather than actively manage them. investment exposures – or across activities when a Mitigation of consequential risks is the responsibility of single name or an industry is contributing widely to Appropriate selection and pricing of underwriting risks the business areas and the investment unit. The capital the ­profitability and risks of the company through both • Underwriting risks are carefully selected and are priced need for these risks is measured by independent risk insurance and investment activities. to reflect their inherent risk levels. management functions. • Insurance products are developed proactively to meet Concentration risk may also materialize indirectly when clients’ changing needs and preferences. Some risks such as interest rate, currency and liquidity profitability and capital position react similarly to general risks are by their nature simultaneously linked to various economic developments or to structural changes in the activities. In order to manage these risks efficiently, institutional environment in different areas of business. Sampo Group companies have to have a detailed

FINANCIAL STATEMENTS 2019 121 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Effective management of underwriting exposures Effective management of investment portfolios ­ Group level capitalization and liquidity buffers as well as on • Diversification is actively sought. and the balance sheet the Group level management actions. • Reinsurance is used effectively to reduce largest • Balance between expected returns and risks in exposures. ­investment portfolios and the balance sheet is When the above-mentioned core activities are successfully ­optimized, considering the features of insurance implemented, a balance between profits, risks and Careful selection and execution of investment transactions liabilities, internally assessed capital needs, regulatory ­capitalization can be achieved both at company and group • Risk return ratios and sustainability issues of separate solvency rules and rating requirements. level and shareholder value can be created. investments opportunities are carefully analysed. • Liquidity risks are managed by having an adequate • Transactions are executed effectively. portion of investments in liquid instruments. The portion is mainly dependent on the features of the If Group Effective mitigation of consequential risks liabilities. • Counterparty default risks are mitigated by carefully Underwriting Risks selecting counterparties, applying collateral At the Group level, the risk management focus is on As shown in the following graph Breakdown of Gross ­agreements and assuring adequate diversification. the Group-wide capitalization and liquidity. It is also Written Premiums by Business Area, Country and Line of • High quality and cost-efficient business processes are essential to identify potential risk concentrations and to Business, If, 31 December 2019, the If insurance portfolio is maintained. have a thorough understanding of how reported profits of well diversified across Business Areas, Countries and Lines • Continuity and recovery plans are continuously companies would develop under different scenarios. These of Business. The six Lines of Business are segmented in developed to secure business continuity. concentrations and correlations may have an effect on the accordance with insurance class segmentation used in IFRS. Graph 1, 2, 3

Breakdown of Gross Written Premiums If, 31 December 2019, total EUR 4,675 million

By Business Area By Country By Line of Business

● Private 2,706 ● Norway 1,641 ● Motor other and motor ● Commercial 1,188 ● Sweden 1,481 third party liability 1,918 ● Industrial 632 ● Finland 963 ● Workers' compensation 187 ● Baltic 149 ● Denmark 441 ● Liability 291 ● Baltic 149 ● Accident 651 ● Property 1,511 ● Marine, aviation, transport 117

The following adjustments from IFRS LoBs to Solvency II LoBs are made: •FINANCIAL IFRS Line of Business STATEMENTS Motor other 2019 and Motor third party liability (1,918) include Solvency II Line of Business122 Motor vehicle liability insurance (541) and Other motor insurance (1,377). • IFRS Line of Business Accident (651) includes Solvency II Line of Businesss Income protection insurance (331), Other life (45), Medical expense insurance (275) and Assistance (0). GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

There are minor differences between the figures reported The sensitivity of the underwriting result and hence defined in the Underwriting Policy and other issues dealt by Sampo Group and If due to differences in foreign underwriting risk is presented by changes in certain with by the committee. exchange rates used in consolidation. key figures in the table Sensitivity Test of Underwriting Result, If, 31 December 2019 and 31 December 2018. The Underwriting Policy is supplemented with guidelines Premium and Catastrophe Risk and Their outlining in greater detail how to conduct underwriting Management and Control The Underwriting Committee shall give its opinion on within each Business Area. These guidelines cover areas Despite the diversified portfolio, risk concentrations and propose actions in respect of various issues related such as tariff and rating models for pricing, guidelines in and consequently severe claims may arise through, for to underwriting risk. The committee also considers and respect of standard conditions and manuscript wordings, example, exposures to natural catastrophes such as proposes changes to the Underwriting Policy, which is as well as authorities and limits. In accordance with storms and floods. The geographical areas most exposed the principal policy for underwriting, and sets general the instructions for the Underwriting Committee, the to such events are Denmark, Norway and Sweden. In ­principles, restrictions and directions for the under- Committee monitors compliance with the established addition to natural catastrophes, single large claims could writing activities. This document shall be reviewed and underwriting principles. have an impact on the result of insurance operations. The approved at least yearly by the Boards of Directors. negative economic impact of natural catastrophes and The Business Areas manage the underwriting risk single large claims is effectively mitigated by having a The Chairman of the Underwriting Committee is on a day-to-day basis. A crucial factor affecting the well-diversified portfolio and a group-wide reinsurance ­responsible for the approval of underwriting deviations profitability and risk of non-life insurance operations program in place. is the ability to accurately estimate future claims and expenses and thereby correctly price insurance contracts. The premiums within the Private Business Area and Sensitivity Test of Underwriting Result If, 31 December 2019 and 31 December 2018 the premiums for smaller risks within the Commercial Effect on pretax profit, Business Area are set through tariffs. The underwriting of EURm risks in the Industrial Business Area and of more complex Current Change in Key figure level (2019) current level 2019 2018 risks within the Commercial Business Area is to a greater Combined ratio, business area Private 82.0% +/- 1 percentage point +/- 26 +/- 26 extent based on principles and individual underwriting Combined ratio, business area Commercial 88.3% +/- 1 percentage point +/- 12 +/- 12 than on tariffs. In general, pricing is based on statistical Combined ratio, business area Industrial 89.3% +/- 1 percentage point +/- 4 +/- 4 analyses of historical claims data and assessments of Combined ratio, business area Baltics 87.0 % +/- 1 percentage point +/- 1 +/- 1 Net premiums earned (EURm) 4,388 +/- 1 per cent +/- 44 +/- 43 the future development of claims frequency and claims Net claims incurred (EURm) 3,000 +/- 1 per cent +/- 30 +/- 30 inflation. Ceded written premiums (EURm) 200 +/- 10 per cent +/- 20 +/- 18

FINANCIAL STATEMENTS 2019 123 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

If’s Reinsurance Policy stipulates guidelines for the Reserve Risk and Its Management and Control to Sweden and Finland having a long duration of Motor purchase of reinsurance. The need and optimal choice The main reserve risks for If are stemming from other and Motor third party liability (“MTPL”) and Finland of reinsurance is evaluated by considering the expected uncertainty in the claim amounts caused by higher also having a long duration of Workers compensation. The cost versus the benefit of the reinsurance, the impact than expected claims inflation, change in the indexing long duration is mainly due to annuities in these Lines on result volatility and capital requirements. The main of ­annuities in Sweden, change in discount rates or an of Business, which increases the amount of technical tool for this evaluation is If’s internal model in which increased retirement age with the consequences that both provisions. The duration of the provisions, and thus the frequency claims, large claims and natural catastrophes annuities and lump sum payments would increase. sensitivity to changes in interest rates, varies with each are modelled. product portfolio. The weighted average duration for 2019 In the table Technical Provisions by Line of Business across the product portfolios was 6.5 years. A group-wide reinsurance program has been in place in and Major Geographical Area, If, 31 December 2019, the If since 2003. In 2019, retention levels were between SEK technical provisions and durations of If are presented by 100 million (approximately EUR 9.4 million) and SEK 250 Line of Business and major geographical area. Finland’s million (approximately EUR 23.6 million) per risk and SEK and Sweden’s share of technical provisions is larger than 250 million (approximately EUR 23.6 million) per event. the share of gross written premiums, which is mainly due

Technical Provisions by Line of Business and Major Geographical Area If, 31 December 2019 Sweden Norway Finland Denmark Baltics Total EURm Duration EURm Duration EURm Duration EURm Duration EURm Duration EURm Duration Motor other and MTPL 2,120 7.2 534 1.4 1,020 13.3 160 1.7 111 4.5 3,945 7.7 Workers' compensation 0 0.0 186 4.9 1,169 12.4 258 8.0 0 0.0 1,613 10.9 Liability 280 2.8 114 3.2 105 4.0 77 2.8 26 2.7 601 3.1 Accident 371 6.3 397 5.1 169 4.3 104 1.6 7 0.6 1,048 5.0 Property 402 1.1 493 1.1 239 0.9 103 0.8 34 0.8 1,271 1.0 Marine, aviation, transport 25 1.3 36 1.1 8 1.3 17 1.0 2 0.7 89 1.1 Total 3,198 5.9 1,760 2.6 2,710 10.9 719 3.5 181 3.3 8,568 6.5

FINANCIAL STATEMENTS 2019 124 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Reserves are exposed mainly to inflation and discount rates Sensitivities of Technical Provisions and to some extent to life expectancy. The sensitivity of If’s If, 31 December 2019 technical provisions to an increase in inflation, an increase Effect in life expectancy and a decrease in the discount rate is Technical provision item Risk factor Change in risk parameter Country EURm 2019 Sweden 158.3 presented in the table Sensitivities of Technical Provisions, Increase by 1 percentage Denmark 12.2 If, 31 December 2019. Nominal provisions Inflation increase point Norway 51.5 Finland 33.4 The technical provisions are further analyzed by claims Sweden 24.5 Annuities and estimated share of Lifee xpectancy­ increase Decrease in mortality Denmark 1.7 years. The output from this analysis is illustrated claims provisions to future annuities by 1 year Finland 67.0 both before and after reinsurance in the claims cost Discounted provisions Sweden 68.0 trend tables. These are disclosed in the Note 26 to Decrease by 1 percentage (annuities and part of Decrease in discount rate Denmark 17.8 point the ­Financial Statements. Finnish IBNR) Finland 299.4

The anticipated inflation trend is considered when annuities. The choice of index is stipulated in regulation The Actuarial Committee is a preparatory and advisory calculating all provisions and is of the utmost importance and is therefore exposed to regulatory change through e.g. board for If Chief Actuary. The committee secures a for claims settled over a long period of time, such as a political decision. The retirement age is another factor comprehensive view over reserve risk, discusses and Motor other, Motor third party liability and Workers’ that affects the value of annuities since these decrease or gives recommendations on policies and guidelines for compensation. The anticipated inflation is based on expire at retirement. An increased retirement age through ­calculating technical provisions. external assessments of the inflation trend in various for example a political decision, will therefore increase the areas, such as the consumer price index and payroll index, value of annuities. The present value of annuities is also The actuaries continuously monitor the level of provisions combined with If’s own estimation of costs for various sensitive to changes in the discount rates used to discount to ensure that they comply with the established guidelines. types of claims. For Lines of Business such as Motor other, the nominal cash flows. The most material balances in If The actuaries also develop methods and systems to support Motor third party liability and Workers’ compensation, of annuities with significant sensitivity to discount rates these processes. legislation differs significantly between countries. Some of relates to the business in Sweden, Finland and Denmark. the technical provisions for these lines include annuities The actuarial estimates are based on historical claims and which are sensitive to changes in mortality assumptions The Board of Directors of If decides on the guidelines existing exposures that are available at the balance sheet and discount rates. The proportion of technical provisions governing the calculation of technical provisions. The date. Factors that are monitored include loss development related to Motor other, Motor third party liability and Chief Actuary is responsible for developing and presenting trends, the level of unpaid claims, changes in legislation, Workers’ compensation was 65 per cent. guidelines on how the technical provisions are to be case-law and economic conditions. When setting the non- calculated and for assessing whether the level of total life and life provisions, established actuarial and statistical The indexing of Swedish Motor third party liability provisions is sufficient. On If level, the Chief Actuary issues methods are used. annuities is one of the factors that affects the value of a quarterly report on the adequacy of technical provisions.

FINANCIAL STATEMENTS 2019 125 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Market Risks investments was at 31 December 2019 concentrated to The composition of the investment portfolios by asset Fixed income investments and listed equity instruments financial institutions. The role of real estate, private classes in If at year end 2019 and at year end 2018 and form the major part of the investment portfolio of EUR equity, and other alternative investments is immaterial. average maturities of fixed income investments are shown 11,109 million (11,092). A large part of the fixed income in the table Investment Allocation, If, 31 December 2019 and 31 December 2018.

Investment Allocation If, 31 December 2019 and 31 December 2018 31 Dec 2019 31 Dec 2018 Market value, Average maturity, Market value, Average maturity, Asset Class EURm Weight years EURm Weight years Fixed income total 9,808 88% 2.8 9,949 90% 2.7 Money market securities and cash 454 4% 0.1 370 3% 0.0 Government bonds 662 6% 3.8 884 8% 3.1 Credit bonds, funds and loans 8,692 78% 2.8 8,696 78% 2.8 Covered bonds 2,616 24% 2.5 2,683 24% 2.4 Investment grade bonds and loans 3,582 32% 2.8 3,770 34% 2.7 High-yield bonds and loans 1,587 14% 3.4 1,469 13% 3.4 Subordinated / Tier 2 467 4% 3.2 428 4% 4.0 Subordinated / Tier 1 440 4% 2.2 346 3% 2.5 Hedging swaps 0 0% - 0 0% - Policy loans 0 0% 0.0 0 0% 0.0 Listed equity total 1,281 12% - 1,113 10% - Finland 0 0% - 0 0% - Scandinavia 865 8% - 769 7% - Global 417 4% - 344 3% - Alternative investments total 21 0% - 31 0% - Real estate 3 0% - 12 0% - Private equity 9 0% - 19 0% - Biometric 0 0% - 0 0% - Commodities 0 0% - 0 0% - Other alternative 9 0% - 0 0% - Trading derivatives 0 0% - -2 0% - Asset classes total 11,109 100% - 11,092 100% - FX Exposure, gross position 113 - - 229 - -

FINANCIAL STATEMENTS 2019 126 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

If’s investment management strategy is conservative, and credit spreads as well as regulatory capital require- and rating in the following table, which also includes with a low equity share and low fixed-income duration. ments are regularly monitored. counterparty risk exposures relating to derivative transactions. Counterparty default risks are described in Both investment performance and market risk are actively Market Risks of Fixed Income and Equity more detail in section Counterparty Default Risks. Due monitored and controlled by the Investment Control Instruments to differences in the reporting treatment of derivatives, Committee monthly and reported to the Own Risk and the figures in the table are not fully comparable with other Solvency Assessment Committee (“ORSA Committee”) Spread Risk and Equity Risk tables in Sampo Group’s Financial Statements. quarterly. In addition, the allocation limits, issuer and Spread risk and equity risk are derived only from the asset counterparty limits, the sensitivity limits for interest rates side of the balance sheet. Exposures in fixed income and equity instruments are presented by sector, asset class

FINANCIAL STATEMENTS 2019 127 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Exposures by Sector, Asset Class and Rating If, 31 December 2019 Change AA+ A+ BBB+ BB+ Fixed from - - - - income Listed Counter- 31 Dec EURm AAA AA- A- BBB- C D Non-rated total equities Other party risk Total 2018 Basic industry 0 0 20 87 20 0 11 139 39 0 0 178 18 Capital goods 0 0 61 41 10 0 121 232 454 0 0 686 134 Consumer products 0 0 170 275 16 0 85 546 221 0 0 768 -83 Energy 0 0 0 0 34 0 128 163 8 0 0 171 -140 Financial institutions 37 1,015 1,058 743 84 0 54 2,991 0 0 3 2,995 115 Governments 9 0 0 0 0 0 0 9 0 0 0 9 -124 Government guaranteed 9 27 0 0 0 0 0 36 0 0 0 36 0 Health care 7 0 10 27 0 0 36 80 82 0 0 162 -4 Insurance 0 0 42 82 26 0 42 192 0 0 0 192 2 Media 0 0 0 0 0 0 16 16 0 0 0 16 -6 Packaging 0 0 0 0 0 0 15 15 0 0 0 15 10 Public sector, other 514 66 0 0 0 0 0 579 0 0 0 579 -136 Real estate 0 5 88 268 55 0 545 961 0 3 0 965 171 Services 0 0 0 44 69 0 33 146 0 0 0 146 -34 Technology and electronics 0 0 19 13 10 0 105 147 0 0 0 147 48 Telecommunications 0 0 21 133 48 0 0 202 60 0 0 261 -22 Transportation 0 58 27 31 0 0 231 347 1 0 0 348 77 Utilities 0 0 61 114 118 0 29 322 0 0 0 322 -46 Others 0 26 0 0 0 0 27 53 0 9 0 63 21 Asset-backed securities 0 0 0 0 0 0 0 0 0 0 0 0 0 Covered bonds 2,535 70 11 0 0 0 0 2,616 0 0 0 2,616 -67 Funds 0 0 0 0 0 0 0 0 417 8 0 425 62 Clearing house 0 0 0 0 0 0 0 0 0 0 0 0 0 Total 3,110 1,268 1,589 1,858 491 0 1,478 9,794 1,281 21 3 11,099 -3 Change from 31 Dec 2018 -270 -111 -124 80 102 0 161 -163 168 -10 2 -3 0 The figures include bank account balances related to insurance activities.

FINANCIAL STATEMENTS 2019 128 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Most of the fixed income exposures are in investment Market Risks of Balance Sheet Interest Rate Risk grade issues and currently the role of Nordic covered In general, If is negatively affected when interest rates bonds and Nordic banks as issuers is central. Within fixed Asset and Liability Management Risk are decreasing or remaining at low levels, as the duration income investments part of the money market securities, The ALM risk is considered through the risk appetite of liabilities in If is longer than the duration of assets. cash and investment grade government bonds form a framework and its management and governance are If has over the years gradually decreased its combined liquidity buffer. based on If’s Investment Policies. In general, to maintain ratio level to counteract falling interest rates. Interest the ALM risk within the overall risk appetite, the cash rate sensitivity in terms of the average duration of fixed The changes in equity positions during the year can flows of insurance liabilities are matched by investing income investments was 1.3. The respective duration of be seen in the graph Breakdown of Listed Equity in fixed income instruments denominated in the same insurance liabilities was 6.5. Interest rate risk is managed ­Investments by Geographical Regions, If, 31 December currencies as the liabilities. Derivatives can be used to by changing the duration of assets and interest rate 2019 and 31 December 2018. manage the ALM risk. derivatives based on the market view and risk appetite.

In the financial accounts, most of the technical provisions are nominal, while the annuity and annuity Breakdown of Listed Equity Investments by Geographical Regions IBNR reserves, are discounted using interest rates in If accordance with the regulatory rules. Accordingly, from an accounting perspective, If is mainly exposed 31 December 2019 31 December 2018 total EUR 1,281 million Total EUR 1,113 million to changes in inflation and regulatory discount rates.

146 117 120 147 From an economic perspective, in which the cash flows 48 26 of insurance liabilities are discounted with prevailing 83 86 interest rates, If is exposed to changes both in inflation and nominal interest rates. For more information see the

139 112 table Sensitivities of Technical Provisions, If, 2019 in the section Underwriting Risks.

Currency Risk 748 622 If writes insurance policies that are mostly denominated in the Scandinavian currencies and in the euro. The ● Denmark 0% ● Eastern Europe 0% ● Denmark 0% ● Eastern Europe 0% ● Norway 9% ● North America 7% ● Norway 13% ● North America 8% currency risk is to a large extent reduced by matching ● Sweden 58% ● Latin America 4% ● Sweden 56% ● Latin America 2% technical provisions with investment assets denominated ● Finland 0% ● Far East 11% ● Finland 0% ● Far East 11% in the corresponding currencies or by using currency ● Western Europe 11% ● Western Europe 10% derivatives. The currency exposure in insurance

FINANCIAL STATEMENTS 2019 129

● Denmark X ● Itä-Eurooppa X ● Norway X ● Pohjois-Amerikka X ● Sweden X ● Latinalainen ● Finland X Amerikka X ● Länsi-Eurooppa X ● Kaukoitä X GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

­operations is hedged to the base currency on a regular table Transaction Risk Position, If, 31 December 2019. Liquidity Risk basis. The currency exposure in investment assets is The table shows the net transaction risk exposures and In If, liquidity risk is limited, since premiums are controlled weekly and hedged when the exposure has the changes in the value of positions given a 10 per cent collected in advance and large claims payments are reached a specific level, set with respect to cost efficiency decrease in the value of the base currency. usually known a long time before they fall due. Liquidity and minimum transaction size. An active currency risks are managed by cash management functions which management can be performed within set limits. The In addition to transaction risk, If is also exposed to are responsible for liquidity planning. Liquidity risk is transaction risk positions against SEK are shown in the translation risk which at the Group level stems from reduced by having investments that are readily tradable foreign operations with other base currencies than SEK. in liquid markets. The liquidity of financial assets is analysed and reported to the ORSA Committee.

Transaction Risk Position If, 31 December 2019

Base currency, SEKm EUR USD JPY GBP SEK NOK CHF DKK Other Total, net Insurance operations -3,276 -143 -1 -3 -8 -1,977 -3 -806 -17 -6,232 Investments 2,311 453 0 0 0 2,112 0 132 1 5,009 Derivatives 947 -345 0 2 16 -113 4 681 7 1,199 Transaction risk, net position -18 -35 0 -1 9 22 1 7 -9 -24 Sensitivity: SEK -10% -2 -3 0 0 1 2 0 1 -1 -2

If's transaction risk position in SEK represents exposure in foreign subsidiaries /branches within If with base currency other than SEK.

FINANCIAL STATEMENTS 2019 130 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

The maturities of technical provisions and financial Counterparty Default Risks Reinsurance Counterparty Risk assets and liabilities are presented in the table Cash Flows In If, the major three sources of counterparty risk are Reinsurance is used regularly to utilize If’s own capital According to Contractual Maturity, If, 31 December 2019. reinsurance, financial derivatives and other receivables. base efficiently and reduce the cost of capital, limit large The average maturity of fixed income investments was 2.8 fluctuations of underwriting results and have access years in If. The table shows the financing requirements Counterparty default risk arising from receivables from to the reinsurers’ competence base. The Reinsurance resulting from expected cash inflows and outflows arising policyholders and other receivables related to commercial Committee (“RC”) is a collaboration forum for reinsurance from financial assets and liabilities as well as technical transactions is very limited, because non-payment related issues in general and shall give its opinion on and provisions. of premiums generally results in cancellation of the propose actions in respect of such issues. The committee ­insurance policies. shall consider and propose changes to the Reinsurance If has a relatively low amount of financial liabilities and Policy and the Internal Reinsurance Policy. The Chairman thus the refinancing risk is small. is responsible for reporting policy deviations and other issues dealt with by the committee.

Cash Flows According to Contractual Maturity If, 31 December 2019 Carrying Carrying Carrying amount without amount with Cash flows amount contractual contractual EURm total maturity maturity 2020 2021 2022 2023 2024 2025–2034 2035– Financial assets 12,679 1,626 11,053 1,477 2,167 2,033 1,590 1,839 898 0 of which interest rate swaps 0 0 0 0 0 0 0 0 0 0 Financial liabilities 1,118 2 1,116 -30 -316 -3 -96 0 0 0 of which interest rate swaps 25 0 25 -26 -1 0 0 0 0 0 Lease liabilities 124 0 124 -23 -23 -19 -13 -11 -47 0 Net technical provisions 8,568 0 8,568 -3,061 -993 -589 -417 -334 -1,868 -1,695 In the table, financial assets and liabilities are divided into contracts that have an exact contractual maturity profile, and other contracts. Only the carrying amount is shown for the other contracts. In addition, the table shows expected cash flows for net technical provisions, which by their nature, are associated with a certain degree of uncertainty.

FINANCIAL STATEMENTS 2019 131 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

The distribution of reinsurance receivables and 2018. In the table EUR 136 million (142) of reinsurance Counterparty Risk Related to ­reinsurers’ portion of outstanding claims on 31 December recoverables are excluded, which mainly relates to Financial Derivatives 2019 per rating category is presented in the table Reinsur- captives and statutory pooled solutions. In If, the default risk of derivative counterparties is ance Recoverables, If, 31 December 2019 and 31 December a by-product of managing market risks. The role of long-term interest rate derivatives has been immaterial and counterparty risk stems mainly from short-term Reinsurance Recoverables FX-derivatives. The counterparty risk of bilaterally If, 31 December 2019 and 31 December 2018 settled derivatives is mitigated by a careful selection 31 Dec 2019 31 Dec 2018 of ­counterparties, by diversification of counterparties Rating Total, EURm % of total Total, EURm % of total to prevent risk concentrations and by using collateral AAA 0 0% 0 0% AA+ - A- 94 99% 82 99% ­techniques, e.g. ISDA Master Agreements backed by BBB+ - BBB- 1 1% 1 1% Credit Support Annexes. If settles interest rate swaps BB+ - C 0 0% 0 0% in central clearing houses, which mitigates bilateral D 0 0% 0 0% ­counterparty risk but also results in a systemic risk Non-rated 0 0% 0 0% exposure related to centralised clearing parties. Total 95 100% 83 100%

Because the recoverables reported above are typically not Security Policy. The Chairman is responsible for reporting covered by collaterals the whole amount is exposed to policy deviations and other issues dealt with by the counterparty risk. committee.

If has a Reinsurance Security Policy that sets Most of the reinsurers have ratings between AA+ and ­requirements for the reinsurers’ minimum credit ratings A-. The ten largest individual reinsurance recoverables and the maximum exposure to individual reinsurers. amounted to EUR 161 million, representing 70 per cent of Also, the own credit-analysis plays a central role when the total reinsurance recoverables including captives and counter­parties are selected. statutory pooled solutions.

The Reinsurance Security Committee shall give input The total ceded premium related to treaty and facultative and suggestions to decisions in respect of various issues reinsurance amounted to EUR 55.2 million. Of this regarding reinsurance default risk and risk exposure, amount, 100 per cent was related to reinsurance counter- as well as proposed deviations from the Reinsurance parties with a credit rating of A- or higher.

FINANCIAL STATEMENTS 2019 132 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Topdanmark Group Premium and Catastrophe Risk and Their Management With certain restrictions, acts of terrorism are covered by and Control the reinsurance contracts. The national Danish pool for Underwriting Risks The main underwriting risk that influences the NBCR (nuclear, biological, chemical, radiological) risks performance is the risk of catastrophe events. However, was closed as of 1 July 2019. Starting 1 July 2019, the NBCR Non-Life Underwriting Risks ­Topdanmark Forsikring has a very comprehensive rein­ acts of terrorism are covered by a public organization. As shown in the graph Breakdown of Gross Written su­rance programme in place contributing to the low level This is based on a new Act on NBCR acts of terrorism. ­Premiums by Business Area, Country and Line of of underwriting risk. The largest retention level of DKK Under the new scheme the costs from a NBCR attack in Business, Topdanmark Non-Life, 2019, Topdanmark’s 100 million plus reinstatement for each event is on storm Denmark will initially be borne by the State, but those insurance portfolio is diversified across Business Areas events. The maximum retention on fire events is DKK 25 costs will subsequently be recovered from policyholders. and Lines of Business. million and in workers' compensation risks are covered up to DKK 1 billion with a retention of DKK 50 million.

Graph 7, 8, 9

Breakdown of Gross Written Premiums Topdanmark Non-Life, 2019, total EUR 1,272 million

By Business Area By Country By Line of Business

● Private 690 ● Norway 0 ● Motor other and motor ● Commercial 581 ● Sweden 0 third party liability 288 ● Industrial 0 ● Finland 0 ● Workers' compensation 98 ● Denmark 1,272 ● Liability 76 ● Baltic 0 ● Accident 251 ● Property 552 ● Marine, aviation, transport 7

FINANCIAL STATEMENTS 2019 133 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Premium risk reduction measures taken at different levels ­premiums to cover losses from customers who pay too In addition to the analysis described above, Topdanmark of operations are as follows: small premiums. continuously improves its administration systems to achieve more detailed data, which in turn enables the • Collection of data on risk and claims history The historical profitability of major SME customers company to identify the claims trends at an earlier point • Use of collected and processed data in profitability with individual insurance schemes is monitored using in time and compile information on the constituent parts reporting, risk analyses and in the internal model customer assessment systems. These assessment systems of the various types of claims. • Ongoing follow-up on risk developments as well as enable Topdanmark to achieve accurate information quarterly forecasts for future risk development about income, claims expenses, combined ratio etc. for The non-life risk scenarios are presented in the table • Pricing using a statistical model tool including each customer. ­Non-Life Insurance Risk Scenarios, Topdanmark, ­customer scoring tools 31 December 2019. • Reinsurance cover that reduces the risk especially for catastrophe events Non-Life Insurance Risk Scenarios • Ongoing follow-up on the risk picture and reinsurance Topdanmark, 31 December 2019 coverage in the Risk Committee. Current level Key figure (2019) Change in current level EURm after tax To maintain product and customer profitability, Combined ratio, business area Private 86.6% +/- 1 percentage point +/- 5.4 Topdanmark monitors changes in its customer portfolios. Combined ratio, business area Commercial 80.3% +/- 1 percentage point +/- 4.6 Provisions are recalculated, and the profitability reports Net premiums earned (EURm) 1,178 +/- 1 per cent +/- 9.2 Net claims incurred (EURm) 779 +/- 1 per cent +/- 6.0 are updated in the same context on a monthly basis. Ceded written premiums (EURm) -81 +/- 10 per cent +/- 6.3 Based on this reporting, trends in claim levels are carefully assessed and price levels may be adjusted if considered necessary. Reserve Risk and Its Management and Control the first year. Long-tail lines relate to personal injury and In the private market segment, customer scoring is used, The insurance lines of business are divided into short-tail liability and consist of the lines Workers' compensation, and customers are divided into groups according to their i.e. those lines where the period from notification until Accident, Motor third party insurance and Commercial expected profitability levels. The customer scoring has settlement is short and long-tail i.e. those lines where liability. Composition of non-life provisions for two roles. First it helps to maintain the balance between the period from notification until settlement is long. The ­outstanding claims is presented in the following table. the individual customer's price and risk. Secondly it main short-tail lines in Topdanmark are buildings and facilitates the fairness between individual customers other property and comprehensive motor insurance. For by ensuring that no customers are paying too large the short-tail lines the claims are mainly settled within

FINANCIAL STATEMENTS 2019 134 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Composition of Non-Life Provisions for Outstanding Claims the general development in prices or due to a change Topdanmark, 31 December 2019 and 31 December 2018 in judicial practice or legislation. The sufficiency of 2019 2018 the provisions is tested in key lines by calculating the Provisions for outstanding claims % Duration % Duration provisions using alternative models as well, and then Short-tail 12.2 1.0 12.1 1.0 Annuity provisions in workers' compensation 26.7 10.5 24.3 10.6 comparing the compensation with information from Other claims provisions in workers' compensation 21.8 1.7 24.1 2.8 external sources, primarily statistical material from the Accident 28.8 3.9 27.3 3.8 Danish Labour Market Insurance and the Danish Road Motor personal liability 6.9 2.3 8.9 2.2 Sector/Road Directorate. Commercial liability 3.5 1.8 3.3 1.8

The actuarial team has a continuous dialogue with the claims departments on any changes in the practices Due to the longer period of claims settlement, the of claim incidents adopted by the Danish Labour Market regarding new legislation, case-law or compensation long-tail lines of business are generally riskier than the Insurance which decides on compensation for injury practices as well as on the impact of such changes on the short-tail lines. It is not unusual that claims in long-tail and loss of earnings potential in all cases of serious routines used to calculate individual provisions. lines are settled three to five years after notification and in industrial injuries. The practice adopted by the Danish rare cases up to 10–15 years. Labour Market Insurance also has some impact on the levels of compensation for accident and personal injury The reserve risk is calculated using Topdanmark’s partial within motor, liability and commercial liability insurance. internal model for insurance risk. Workers’ compensation Supreme court decisions can also influence the provisions claims provision has by far the biggest risk, followed by for former years especially for Workers’ compensation. the other long-tail claims provisions. The provisioning risk represents mostly the ordinary During such a long period of settlement, the levels of uncertainty of calculation and claims inflation, i.e. an compensation could be significantly affected by changes increase in the level of compensation due to the annual in legislation, case-law or practice in the compensation increase in compensation per policy being higher than

FINANCIAL STATEMENTS 2019 135 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Life Underwriting Risks Premiums, Topdanmark Life Insurance, 31 December 2019 Risk return on shareholders’ equity together with other The split of premiums between products during the and 31 December 2018. main components of life business result are shown in the last two years is presented in the table Sources of Gross table Result of Life Insurance, Topdanmark 31 December 2019 and 31 December 2018.

Sources of Gross Premiums Profit on life insurance consists of the following items: Topdanmark Life Insurance, 31 December 2019 and 31 December 2018

EURm 2019 2018 • Investment return on shareholders’ equity, which is the With profit schemes 62.4 66.1 actual return on assets allocated to own funds. Unit-linked schemes 340.2 273.7 • Sales and administration, which consists mainly of Group life 36.0 43.2 the cost fees received from the customers deducted by Regular premiums 438.6 383.0 With profit schemes 46.1 71.3 actual costs. Unit-linked schemes 1,002.8 902.3 • Insurance risk, which is the insurance risk result on Single premiums 1,048.9 973.6 death, invalidity, and other such items. Gross premiums 1,487.5 1,356.6 • Risk return on shareholders’ equity (divided into a fair risk return and a profit margin) from with profit schemes. The risk return is calculated for each The focus of sales is on unit-linked schemes and the is paid only to the beneficiaries in case of the insured’s ­contribution group and has been based on their premiums received are mostly of unit-linked schemes. death during the insurance period. It is irrelevant whether estimated risk for the company and the desired level of The regular premiums are growing steadily while the the death is due to accident or illness. profit margin. The risk return is conditional. The risk single premiums are fluctuating more from year to year. return is transferred to shareholders’ equity if it can be covered primarily by collective bonus potentials. The risk inherent in the life business is firstly related to Result of Life Insurance the with profit technical provisions. As the majority of Topdanmark, 31 December 2019 and 31 December 2018 new contracts are written as unit-linked contracts, the risk will not increase as much as the volume of premiums and EURm 2019 2018 Investment return on shareholders' equity 24.9 14.7 total provisions. Sales and administration -2.9 -2.7 Insurance risk 3.0 -0.3 Group life insurance is a collective life insurance without Risk return on shareholders' equity 18.8 18.8 savings – that is, a risk insurance – where the sum insured Profit on life insurance 43.9 30.5

FINANCIAL STATEMENTS 2019 136 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

The main risks of Topdanmark Livsforsikring can be time it can level out the market and insurance risks within Declines in the collective bonus potential are most summarized as follows: the individual risk groups. frequent, due to the investment return being lower than the annual addition of interest to deposits. • Limited loss-absorbing buffers (bonus potentials) The Solvency Capital Requirement is calculated quarterly. combined with low interest rates environment When deemed necessary, due to market developments, In order to protect shareholders' equity, it will, in general, • Disability risk the frequency of calculation is increased and, if necessary, be relevant to reduce market risks in the event of lower • Longevity risk the number and type of scenarios are increased. interest rates.

A low interest rate level with material elements of nega- Trends in product claim levels are assessed on top of All policies have been split into contribution groups tive interest rates and, in particular, sustained low interest the calculation of the insurance provisions. Profitability according to the guaranteed benefit scheme. For all rates along with prolonged lives represent a significant models are applied systematically as a follow-up on contribution groups, there are separate loss absorbing risk scenario for insurers with guaranteed benefits as customer and portfolio levels. This assessment is used to buffers and hence in each contribution group, the separate there will be a reduction of the collective and individual identify price adjustment needs. investment policy must be in line with risk taking capacity bonus potentials used for loss absorption by interest and to ensure the ability to meet the guaranteed benefits. risk groups. When a risk event occurs, the effect on the Loss Absorbing Buffers in the Event of Low Interest Rates Market risk is adjusted continuously in accordance with profit will depend on the size of bonus potentials which Customers’ individual and collective bonus potential the risk capacity of the contribution groups, and the are a loss absorbing capacity (“LAC”) within the insurance together creates the loss absorbing buffers in Danish life movements in interest rates are monitored so that risk liabilities. When the loss absorbing capacity is higher than insurance against any losses incurred by customers on reducing actions can be taken when needed. the losses, losses on the insurance liabilities are covered investment activities and insurance covers. by the bonus potentials. For risk groups where the bonus Disability potentials are fully used, the equity will cover the risk. Low interest rates mean that the market value of the Disability risk is the risk of increased disability intensity guarantees granted is high, and hence the related or declines in the rates of resumption of work. Losses may Life Insurance Underwriting Risk Control individual bonus potential is low. The lower the individual incur due to an increase in disability frequency or due to The loss-absorbing buffers are a crucial part of the bonus potential is, the higher is the risk of any losses to inadequate health evaluation when the policy is written. with profit concept in leveling of yields and claims be absorbed wholly or partially by shareholder's equity. over time. Therefore, Topdanmark Livsforsikring has In case interest rates are high, the same losses could, to a Extra costs, due to a permanent change in disability risk, continuous focus on the solvency position, the changes in larger degree, be absorbed by the bonus potential. will be partially covered by individual and collective the individual risks and the development of the loss-­ bonus potential. The remainder affects the result for the absorbing buffers. The latter is important because over year and consequently shareholders' equity.

FINANCIAL STATEMENTS 2019 137 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Longevity • Changes in insurance contract conditions that con­ Committee and via the on-going follow-up of forecasts. If Longevity risk is the risk that customers with life tribute to risk mitigation for similar claims in the future the forecasts are not met, the risk reduction methods may dependent policies, primarily annuities, live longer need to be corrected. than expected. That will increase provisions for lifetime The monitoring of whether the risk reduction methods products. are still effective is i.a. via continuous follow-up of the The life insurance risk scenarios can be found in the company’s risk profile and reinsurance cover in the Risk following table. Extra costs, due to longer lifetimes, will be partially covered by individual and collective bonus potential. The remainder affects profit/loss for the year and ­consequently shareholders' equity.

Risk Scenarios in Life Insurance The following risk reduction measures and methods are Topdanmark, 31 December 2019 and 31 December 2018 used in Topdanmark Livsforsikring: EURm after tax 2019 2018 Disability intensity - 35% increase* -1.0 -1.4 • All policies in the average return environment are Mortality intensity - 20% decline -3.4 -3.3 divided according to the granted benefit guarantee and * 35% increase first year, subsequently 25%, coincident with 20% decline in reactivation rates the investment policy is designed to ensure the ability to meet the guarantees • Market risk is freely adjustable in relation to the individual customer groups’ risk capacity Market Risks Market risks are limited to the extent that is considered • Normal fluctuations in ROI and risk results in the In general, the long-term value creation shall be based appropriate, so that it is highly probable that the average interest rate environment are captured by mainly on the acceptance of insurance risks. To supple- company gains a profit even in the very unfavourable bonus potentials per contribution group ment the Group’s profit from its insurance activities, financial market scenarios. Large risk exposures or highly • Reinsurance Topdanmark accepts a certain level of financial market correlated risks are covered to prevent unnecessary losses • Prices for death and disability covers are adjusted risks as well, given its strong liquidity position and stable, and market risks originating from insurance operations. continuously in relation to the market situation and the high earnings from insurance operations. Hence, in The investment portfolio shall be managed in a way observed claims history addition to fixed income instruments, Topdanmark has that market risk taking shall not endanger the normal • The basis of new subscription is changed as needed invested, among other things, in equities, properties and operations or implementation of planned actions in • Establishing business procedures that ensure that the CDOs in order to improve the average investment return. unfavourable market conditions. products are sold at the right price/risk mix

FINANCIAL STATEMENTS 2019 138 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

To reach the aforementioned general goals, the invest- At the same time, the policy sets the framework for Asset Allocations: Topdanmark Excluding ment policy sets the company's objectives, strategies, investment of customers' savings, bonus schemes and Unit-Linked organization and reporting practices on investments. unit-linked savings (customer funds) in Topdanmark As described earlier, in life insurance different contribution The investment strategy is more precisely determined Livsforsikring, so that the company can continue to offer groups have their own investment strategies and their in terms of market risk limits and specific requirements attractive savings products to its clients with competitive loss absorbing buffers and hence it is relevant to assess for certain types of positions and sub-portfolios (risk returns in relation to the investment risks accepted by the ­allocations and returns of these assets only in relation appetite). The investment strategy is determined by clients. to their respective contribution groups. However, the the Board and revised at least once a year. Appropriate ­company bears some market risk and thus the non-life financial risk mitigation techniques are used. In addition to the investment policies, the companies and life investment allocations are shown in the have a capital plan and a capital emergency plan if table ­Investment Allocations Excluding Unit-Linked, When selecting the investment assets, a portfolio compo- sudden changes occur on the asset or liability side. ­Topdanmark, 31 December 2019 and 31 December 2018 sition that matches the risk features of the corresponding without assets covering unit-linked liabilities. liabilities is sought. The purpose of the investment policy When market risks are measured and managed, all is also to ensure that the company has implemented exposures are included, regardless of whether they arise effectively the organization, systems and processes from active portfolio management of investments or from necessary to identify, measure, monitor, manage and annuities, which are considered as market risk. report on investment risks to which it is exposed.

FINANCIAL STATEMENTS 2019 139 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Investment Allocations Excluding Unit-Linked Topdanmark, 31 December 2019 and 31 December 2018

Topdanmark Non-Life Topdanmark Life 31 Dec 2019 31 Dec 2018 31 Dec 2019 31 Dec 2018 Market value, Market value, Market value, Market value, Asset class EURm Weight EURm Weight EURm Weight EURm Weight Fixed income total 2,089 90% 1,992 91% 4,103 77% 3,283 72% Money market securities and cash 127 5% 258 12% 241 5% 329 7% Government and mortgage bonds 1,812 78% 1,585 72% 3,456 65% 2,507 55% Credit bonds 6 0% 14 1% 141 3% 168 4% Index-linked bonds 72 3% 68 3% 170 3% 167 4% CDOs 72 3% 68 3% 95 2% 112 2% Listed equity total 124 5% 104 5% 360 7% 430 9% Denmark 38 2% 30 1% 73 1% 84 2% Scandinavia 2 0% 2 0% 8 0% 8 0% Global 84 4% 72 3% 279 5% 337 7% Alternative investments total 107 5% 93 4% 869 16% 852 19% Real estate 57 2% 47 2% 520 10% 501 11% Unlisted equities and hedge funds 50 2% 46 2% 349 7% 351 8% Asset classes total 2,321 100% 2,189 100% 5,332 100% 4,564 100%

The exposure in equities outside Denmark and credit bonds has been adjusted by the use of derivatives. Unlisted equities and hedge funds include also private equity and direct holdings in non-listed equities.

The equity portfolios are well diversified and without mortgage bonds should be assessed in connection with The CDO category primarily includes positions in CDO major single positions, when associated companies are return and revaluation of non-life insurance provisions. equity tranches. The underlying assets consist for disregarded. the most part of senior secured bank loans, while the Credit bonds are composed of a well-diversified remaining part consists primarily of investment grade The main investment assets are government and portfolio, primarily exposed to businesses in Europe, investments in corporate bonds. The real estate portfolio mortgage bonds, which comprise primarily Danish ­predominantly in the investment grade segment. comprises mainly owner-occupied real estate. mortgage bonds. The assets in this asset class are interest rate sensitive and to a significant extent equivalent to Index-linked bonds comprise bonds – primarily Danish the interest rate sensitivity of the non-life insurance mortgage bonds – for which the coupon and principal are provisions. Consequently, the return on government and index-linked.

FINANCIAL STATEMENTS 2019 140 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Market Risks of Balance Sheet Equity Risk Real Estate Risk The Danish part of the equity portfolio is composed The real estates are all located in Denmark, with the Interest Rate Risk based on the OMXCCAP index. The rest of the equity material part in the areas of Copenhagen and Århus. The Interest rate risk is calculated for assets, liabilities and holdings are in the foreign equity portfolio that is based holding is covering life insurance provisions and it is derivative instruments, for which the carrying amount is on the MSCI World DC in its original currency. As a result, diversified over office buildings and residential buildings. dependent on the interest rate level. Regarding insurance Topdanmark’s equity holdings are well-diversified. A The majority of the holding related to Topdanmark’s liabilities Topdanmark is exposed to interest rate risk due breakdown of Topdanmark’s listed equity investments by property within equity is Topdanmark’s own offices. The to provisions for outstanding claims in non-life insurance geographical regions is presented in the following graph. properties are valued in accordance with the rules of the and guaranteed benefits in life insurance. Danish FSA i.e. at market value taking the level of rent and the terms of the tenancy agreements into consideration. Shifting the market yield curve upwards and downwards or changing its shape leads to changed market values of assets Graph 13 and derivatives and thus to unrealized gains or losses. Breakdown of Listed Equity Investments by Geographical Regions Topdanmark When assessing the value and sensitivity of insurance 31 December 2019 31 December 2018 provisions Topdanmark uses the Solvency II discount total EUR 483 million total EUR 534 million curve that has its basis on market yield curve with volatility adjustment (“VA”). The VA component of the DKK yield 23% 21% curve comprises a corrective element based on the spreads of Danish mortgage bonds and European credit bonds. The 1% VA component was 45 bps at the end of 2018 and 19 bps at 1% 1% 48% 1% 51% the end of 2019.

26% Generally, the interest rate risk is limited and controlled by 27% investing in interest-bearing assets in order to reduce the overall interest rate exposure of the assets and liabilities to ● Denmark 111 ● Eastern Europe 0 ● Denmark 114 ● Eastern Europe 0 the desired level. Therefore, the Danish mortgage bonds ● Norway 6 ● North America 232 ● Norway 6 ● North America 270 and government bonds have a central role in the asset ● Sweden 4 ● Latin America 0 ● Sweden 4 ● Latin America 0 portfolios. To further decrease the interest rate sensitivity ● Finland 0 ● Far East 2 ● Finland 0 ● Far East 0 of the balance sheet, swaps and standard swaptions have ● Western Europe 129 ● Western Europe 139 been used for hedging purposes. Equities held by unit-linked customers in Topdanmark Livsforsikring are excluded.

FINANCIAL STATEMENTS 2019 141 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Spread Risk Topdanmark has no significant concentrations on the Inflation Risk Most of Topdanmark's interest-bearing assets comprise investment side, except for the category treasury and Future inflation is implicitly included in the models of AAA rated Danish mortgage bonds and debt issued mortgage bonds that consists primarily of AAA rated Topdanmark uses to calculate its provisions. The general or guaranteed by top-rated European states. The risk of Danish mortgage bonds. principles regarding the inclusion of an allowance for losses is considered to be minor due to the high credit inflation differs when you look at the Workers' compen- quality of the issuers and because investments have been As earlier described, these assets have an interest rate sation and Illness and Accident insurance. In the former made at spreads which are in balance with Topdanmark’s sensitivity that significantly corresponds to the interest the provisions are calculated based on the expected future desired risk ratio levels. The portfolio is well diversified rate sensitivity of the technical provisions. indexation of wages and salaries, and in the latter based both geographically and by issuer type and, therefore, the on the expected development in the net price index. exposure to concentration risk is insignificant. Currency Risk In practice, the investment assets are the only source An expected higher future inflation rate would generally The investment policy stipulates that the portfolio must of currency risk while the insurance liabilities are in be included in the provisions with a certain time delay, be well-diversified by the number of counterparties and the Danish krones. The currency risk is mitigated by while at the same time the result would be impacted by by the amount of exposure to individual counterparties. ­derivatives and net exposures in different currencies are higher future indexation of premiums. To reduce the risk The main source of spread risk is the mortgage bonds. minor except in the euro. of inflation within Workers' compensation and Illness and Accident insurance, Topdanmark uses index-linked Concentration Risk The currency risk is assessed based on SCR. The value of bonds and derivatives to hedge a significant proportion of Topdanmark’s fixed income investments by rating classes the base currency is shocked by 25 per cent against most the expected cash flows sensitive to future inflation. are presented in the table Interest-bearing Assets by of the currencies except against the euro where the largest Rating, Topdanmark, 31 December 2019 and 31 December exposure exists, and the shock is 0.39 per cent, because 2018. the Danish krone is pegged to the euro.

Interest-bearing Assets by Rating Topdanmark, 31 December 2019 and 31 December 2018

Rating class, % 2019 2018 >A+ 82.2 75.9 A+, A, A- 6.7 3.8 BBB+, BBB, BBB- 0.3 0.4

FINANCIAL STATEMENTS 2019 142 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Market Risk Sensitivities Market Risk Sensitivities, The adjacent table is a summary of selected market risk Topdanmark, 31 December 2019 and 31 December 2018 sensitivities. It can be seen from the table that the net EURm after tax Risk scenario 2019 2018 effect of 1 percentage point parallel change in interest Effective interest rate 1 percentage point increase -1.3 3.3 rates would be a less than 10 per cent drop in equity or Interest-bearing assets -69.7 -64.2 property prices. Provisions for claims and benefits etc. 68.3 67.5 Index-linked bonds 5% decrease in value -2.9 -2.7 Equities 10% decrease in value -11.5 -9.5 Liquidity Risk CDOs < AA 10% decrease in value -7.8 -7.5 Topdanmark Group has a strong liquidity position. Firstly, Properties 10% decrease in value -19.2 -20.0 as premiums are paid in the beginning of the coverage Annual loss with up to a 2.5% Currency probability -0.7 -0.1 period the liquidity risk related to customers’ payments is very limited. Secondly, the combination of insurance businesses is of a character in which it is highly unlikely that a liquidity shock could occur, because insurance Expected Cash Flows for Provisions and the Bond Portfolio liabilities are by their nature stable liabilities and in asset Topdanmark, 31 December 2019 and 31 December 2018 portfolios money market investments are complemented Cash flow years by a large portfolio of liquid listed Danish government EURm Carrying amount 1 2–6 7–16 17–26 27–36 >36 Provisions for claims and mortgage bonds. 2018 1,741 -522 -736 -378 -151 -69 -12 2019 1,749 -509 -711 -373 -142 -62 -1 Experience from quite significant and sudden movements Life insurance provisions guarantees and profitsharing in long-term interest rates have confirmed that the 2018 3,098 -344 -941 -1,366 -619 -195 -57 liquidity of these assets is not significantly affected by 2019 3,161 -277 -1,011 -1,296 -540 -159 -41 market shocks. Bond portfolio including interest rate derivatives 2018 4,362 1,938 1,355 1,381 150 0 0 The maturity structure of technical provisions and the 2019 5,543 1,755 2,720 1,816 598 0 0 bond portfolio is presented in the adjacent table. Life insurance provisions for unit-linked products are covered by corresponding investment assets and therefore are not stated in the table. The expected cash flows of the bond portfolio are calculated based on option adjusted durations that are used to measure the duration of the bond portfolio. The option adjustment relates primarily to Danish mortgage bonds and reflects the expected duration capturing the shortening effect of the borrower´s option to have the bond to be redeemed through the mortgage institution at any point in time.

FINANCIAL STATEMENTS 2019 143 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Because of the aforementioned reasons Topdanmark's For reinsurance counterparties, the Board approves Mandatum Life Group liquidity risk is primarily related to the parent company security guidelines which determine the maximum size of Topdanmark A/S. Topdanmark A/S finances its activities reinsurance contract cover per a separate reinsurer. This Underwriting Risks and dividend programme by receiving dividends from its portion is dependent on the reinsurer's rating as well as The development of insurance liabilities during 2019 is subsidiaries. Further financing requirements are covered on Topdanmark’s own assessment of the reinsurer. The shown in the table Analysis of the Change in Provisions by short-term money market loans, typically with a largest risk concentrations may occur in case of major Before Reinsurance, Mandatum Life, 31 December 2019. maturity of one month or less. catastrophe events, including storms and cloudbursts.

Counterparty Default Risks Investments Topdanmark is exposed to counterparty risk in both its Topdanmark may suffer losses due to their counter­ insurance and investment activities. parties’ inability to meet their obligations on bonds, loans and other contracts including derivatives. The majority The main sources of counterparty risk are deposits made of Topdanmark’s interest bearing assets comprise of to individual banks, derivative contracts with banks and Danish mortgage bonds. In order to minimize the risk current receivables from reinsurance companies with the to a single debtor, Topdanmark strives to always have a addition of potential receivables that will arise in case of a well-­diversified portfolio of bonds not only in regard to a 200-year catastrophe event. Topdanmark's counterparty debtor but also geographically. risk is assessed by the SCR standard formula. To limit the counterparty risk of financial contracts, Reinsurance including derivative contracts, the choice of counterpar- Within insurance activities the reinsurance companies' ties is restrictive, and collateral is required when the value ability to pay is the most important counterparty risk of the financial contracts exceeds the predetermined factor. Topdanmark minimises this risk by primarily limits. The size of the limits depends on the counterpar- buying reinsurance cover from reinsurance companies ty's credit rating and the terms of the contract. with a minimum rating of A- and by spreading ­reinsurance cover over many reinsurers.

FINANCIAL STATEMENTS 2019 144 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Analysis of the Change in Provisions Before Reinsurance Mandatum Life, 31 December 2019 Liability Expense Guaranteed Liability EURm 2018 Premiums Claims paid charges interest Bonuses Other 2019 Share % Unit-linked, excl. Baltic 6,810 1,448 -1,116 -77 0 0 886 7,952 66% Individual pension insurance 1,298 55 -19 -14 0 0 191 1,511 13% Individual life 2,195 285 -474 -21 0 0 291 2,277 19% Capital redemption operations 2,519 1,018 -601 -31 0 0 259 3,164 26% Group pension 797 89 -22 -10 0 0 145 1,000 8%

With profit and others, excl. Baltic 4,208 125 -457 -33 112 8 -49 3,913 32% Group pension insurance, segregated portfolio 1,008 2 -57 -1 22 8 -17 964 8% Basic liabilities. guaranteed rate 3.5% 658 2 -57 -1 22 8 -7 623 5% Reserve for decreased discount rate (3.5% -> 0.50%) 250 0 0 0 0 0 13 263 2% Future bonus reserves 100 0 0 0 0 0 -22 78 1% Group pension 1,879 51 -225 -6 57 0 -25 1,732 14% Guaranteed rate 3.5% 1,603 2 -193 -3 53 0 -40 1,424 12% Guaranteed rate 2.5%, 1.5% or 0.0% 276 48 -32 -3 4 0 14 308 3% Individual pension insurance 763 7 -138 -4 28 0 28 684 6% Guaranteed rate 4.5% 567 4 -77 -3 23 0 -19 495 4% Guaranteed rate 3.5% 128 2 -32 -1 4 0 21 122 1% Guaranteed rate 2.5% or 0.0% 68 1 -29 0 1 0 26 67 1% Individual life insurance 153 31 -27 -10 5 0 -10 142 1% Guaranteed rate 4.5% 52 1 -1 -1 2 0 -6 48 0% Guaranteed rate 3.5% 76 1 -8 -3 3 0 4 73 1% Guaranteed rate 2.5% or 0.0% 25 30 -18 -6 0 0 -9 22 0% Capital redemption operations 24 0 0 0 0 0 1 25 0% Guaranteed rate 3.5% 0 0 0 0 0 0 0 0 0% Guaranteed rate 2.5% or 0.0% 24 0 0 0 0 0 1 25 0% Future bonus reserves 0 0 0 0 0 0 0 0 0% Reserve for decreased discount rate 232 0 0 0 0 0 -2 230 2% Longevity reserve 95 0 0 0 0 0 -9 86 1% Assumed reinsurance 3 0 0 0 0 0 0 3 0% Other liabilities 50 34 -11 -13 0 0 -15 47 0% Total, excl. Baltic 11,017 1,574 -1,573 -110 112 8 836 11,865 99% Baltic 159 30 -24 -4 1 0 17 178 1% Unit-linked liabilities 145 28 -22 -3 0 0 18 166 1% Other liabilities 14 2 -2 -1 1 0 0 13 0% Mandatum Life Group total 11,176 1,603 -1,597 -114 113 8 854 12,043 100%

FINANCIAL STATEMENTS 2019 145 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Biometric Risks relatively high, almost 70 years. In the unit-linked group The mortality risk result in life insurance is positive. A Mandatum Life’s main biometric risks are longevity, pension and individual pension portfolio the longevity possible pandemic is seen as the most significant risk that mortality and disability. In general, the long duration risk is less significant because most of these policies are could adversely affect the mortality risk result. of policies and Mandatum Life’s restricted right to fixed term annuities including death cover compensating change policy terms and conditions and tariffs increase the longevity risk. The insurance risk result of other biometric risks has been biometric risks. If the premiums turn out to be inadequate profitable overall, although the different risk results vary and cannot be increased, technical provisions have to The annual longevity risk result and longevity trend is considerably. In the longer term, disability and morbidity be supplemented by an amount corresponding to the analyzed regularly. For the segregated group pension risks are mitigated by the company’s right to raise increase in expected losses. portfolio, the assumed life expectancy related to the insurance premiums for existing policies in case there is technical provisions was revised in 2014 and for the an unfavourable change in the claims development. Longevity risk is the most critical biometric risk in other group pension portfolios in 2002 and 2007. In total, Mandatum Life. The Solvency Capital Requirement of these changes increased the 2019 technical provision by The table Claims Ratios After Reinsurance, Mandatum longevity risk is also highly dependent on the interest EUR 86 million (95) including a EUR 71 million longevity Life, 31 December 2019 and 31 December 2018 shows rate level, which in practice means that the lower the reserve for the segregated group pension portfolio. The the insurance risk result in Mandatum Life’s insurance applied discount rate is, the higher the longevity SCR cumulative longevity risk result has been positive since policies. The ratio of the actual to expected claims would be. Most of the longevity risk arises from the with these revisions. The longevity risk result of group pension costs was 75 per cent in 2019 (76). The sensitivity of the profit group pension portfolio. With profit group pension for the year 2019 was EUR 8.9 million (8.3) after a EUR 8.9 insurance risk result can also be assessed based on the policies have mostly been closed for new members for million release from the longevity reserve. information in the table. For instance, an increase of years and due to this the average age of members is mortality by 100 per cent would increase the amount of benefit payments from EUR 12 million to EUR 24 million.

Claims Ratios After Reinsurance Mandatum Life, 31 December 2019 and 31 December 2018 2019 2018 EURm Risk income Claims expense Claims ratio Risk income Claims expense Claims ratio Life insurance 49.4 23.7 48% 51.2 27.6 54% Mortality 30.4 12.1 40% 32.4 14.8 46% Morbidity and disability 19.0 11.6 61% 18.8 12.8 68% Pension 87.7 78.9 90% 86.7 77.1 89% Individual pension 13.1 13.8 106% 13.7 13.9 101% Group pension 74.6 65.0 87% 73.1 63.3 87% Mortality (longevity) 72.3 63.5 88% 69.9 61.6 88% Disability 2.3 1.5 67% 3.2 1.7 54% Total 137.1 102.5 75% 137.9 104.7 76%

FINANCIAL STATEMENTS 2019 146 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

The underwriting portfolio of Mandatum Life is Reinsurance is used to limit the amount of individual Policyholder Behavior and Expense Risks relatively well diversified and does not include any major mortality and disability risks. The Board of Directors From an Asset and Liability Management point of view, concentration of biometric risks. To further mitigate the annually approves the Reinsurance Policy and determines surrender risk is not material because in Mandatum Life effects of possible risk concentrations, Mandatum Life has the maximum amount of risk to be retained on the around 90 per cent of with profit technical provisions catastrophe reinsurance in place. ­company’s own account. The highest retention of consists of pension policies in which surrender is possible Mandatum Life is EUR 1.5 million per insured. only in exceptional cases. Surrender risk is therefore only In general, biometric risks are managed by careful risk relevant in individual life and capital redemption policies selection, by setting prices to reflect the risks and costs, by The risk result is actively followed and thoroughly of which the related technical provisions amount to less setting upper limits for the protection granted and by use analyzed on an annual basis. Mandatum Life measures than 5 per cent (below EUR 200 million) of the total with of reinsurance. Mandatum Life’s Underwriting Policy sets the efficiency of risk selection and the adequacy of profit technical provisions. Furthermore, the supplements principles for risk selection and limits for sums insured. tariffs by collecting information about the actual claims to technical provisions are not paid out at surrender The Reinsurance Policy governs the use of Reinsurance. expenditure for each product line and each type of risk which also reduces the surrender risk related to the with The Board approves the Underwriting policy, Reinsurance and comparing it to the claims expenditure assumed in profit policies. Due to the limited surrender risk, the Policy, pricing guidelines and the central principles for insurance premiums of every risk cover. future cash flows of Mandatum Life’s insurance liabilities the calculation of technical provisions. are quite predictable. Technical provisions are analyzed and the possible The Insurance Risk Committee is responsible for supplemental needs are assessed regularly. Assumptions Policy terms and tariffs cannot usually be changed maintaining the Underwriting Policy and monitoring the related to technical provisions are reviewed annually. The ­materially during the lifetime of the insurance, which functioning of the risk selection and claims processes. The adequacy of the technical provisions is tested quarterly. increases the expense risk. The behavior of financial Committee also reports all deviations from the Under- Tariffs for new policies are set and the Underwriting ­markets has also an influence on expense risk since writing Policy to the RMC. The Insurance Risk Committee Policy and assumptions used in calculating technical normally the company’s fee income is linked to policy is chaired by the Chief Actuary who is responsible for provisions are updated based on adequacy tests and risk reserves in unit-linked policies. The main challenge is ensuring that the principles for pricing policies and for the result analysis. to keep the expenses related to insurance administrative calculation of technical provisions are adequate and in line with the underwriting and claims management processes.

FINANCIAL STATEMENTS 2019 147 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

processes and complex IT infrastructure at an effective Market Risks In Mandatum Life, the approach to market risk and competitive level. In year 2019, the expense result This section covers market risk related to Mandatum management is based on an analysis of technical of Mandatum Life Group was EUR 24 million (35). Life’s with profit business i.e. that part of the business provisions’ expected cash flows, interest rate level and ­Mandatum Life does not defer insurance acquisition costs. where Mandatum Life carries the investment risk. As current solvency position, i.e. active Asset and Liability Since 2012 the expense result has grown significantly, mentioned earlier, the behavior of financial markets has Management. A common feature for all with profit especially due to increased fee income from unit-linked also an influence on unit-linked business since normally technical provisions is the guaranteed rate and bonuses. business, as presented in the graph Expense Result, the company’s fee income is linked to policy reserves in The cash flows of Mandatum Life's technical provisions Mandatum Life Group, 2010–2019. unit-linked policies. This risk is taken into account as part are relatively well predictable because in most of the of expense risk. company’s with profit policies, surrenders and additional investments are not possible.

Expense Result Mandatum Life’s market risks arise mainly from equity Mandatum Life Group, 2010–2019 investments and interest rate risk related to fixed income assets and insurance liabilities with a guaranteed interest 2019 24.4 rate. The most significant interest rate risk in the life 2018 34.5 insurance business is that fixed income investments 2017 33.2 will not, over a long period of time, generate a return at 2016 26.1 least equal to the guaranteed interest rate of technical 2015 26.8 ­provisions. The probability of this risk increases when 2014 19.6 market interest rates fall and stay at a low level. The

2013 15.3 ­duration gap between the balance sheet’s technical

2012 6.8 provisions and fixed income investments is constantly monitored and managed. Control levels based on an 2011 9.8 internal risk capacity model are used to manage and 2010 7.8 ensure adequate capital in different market situations. EURm 5 10 15 20 25 30 35 Mandatum Life has prepared for low interest rates on the liability side by for example reducing the minimum guaranteed interest rate in new contracts and by supplementing the technical provisions with reserve for decreased discount rate. In addition, existing

FINANCIAL STATEMENTS 2019 148 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

contracts have been changed to accommodate improved of alternative investments – real estate, private equity, Investment allocations and average maturities of fixed ­management of reinvestment risk. biometric and other alternative investments – is also income investments as at year-end 2019 and 2018 are material being 12.3 per cent of total investments. presented in the table Investment Allocation, Mandatum Fixed income investments and listed equity instruments Life, 31 December 2019 and 31 December 2018. form a major part of the investment portfolio, but the role

Investment Allocation Mandatum Life, 31 December 2019 and 31 December 2018 31 Dec 2019 31 Dec 2018 Market value, Average maturity, Market value, Average maturity, Asset class EURm Weight years EURm Weight years Fixed income total 3,669 65% 2.9 3,524 63% 2.8 Money market securities and cash 819 14% 0.0 486 9% 0.0 Government bonds 2 0% 2.7 50 1% 1.6 Credit bonds, funds and loans 2,848 50% 3.8 2,988 53% 3.3 Covered bonds 14 0% 4.7 133 2% 1.4 Investment grade bonds and loans 1,257 22% 3.5 1,563 28% 2.7 High-yield bonds and loans 1,170 21% 3.7 953 17% 3.6 Subordinated / Tier 2 135 2% 4.7 99 2% 5.6 Subordinated / Tier 1 272 5% 5.1 240 4% 5.7 Hedging swaps 0 0% - 0 0% - Policy loans 0 0% - 0 0% 0.0 Listed equity total 1,308 23% - 1,334 24% - Finland 387 7% - 459 8% - Scandinavia 1 0% - 1 0% - Global 921 16% - 875 16% - Alternative investments total 700 12% - 741 13% - Real estate 191 3% - 213 4% - Private equity* 247 4% - 230 4% - Biometric 0 0% - 12 0% - Commodities 0 0% - 0 0% - Other alternative 261 5% - 286 5% - Trading derivatives 3 0% - 2 0% - Asset classes total 5,680 100% - 5,602 100% - FX Exposure, gross position 225 - - 410 - - *Private equity also includes direct holdings in non-listed equities

FINANCIAL STATEMENTS 2019 149 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Market Risks of Fixed Income and Equity risk exposures relating to reinsurance and derivative section Counterparty Default Risks. Due to differences Exposures transactions in the table Exposures by Sector, Asset Class in the reporting treatment of derivatives, the figures in the Fixed income and equity exposures are presented by and Rating, Mandatum Life, 31 December 2019. Counter­ table may not be fully comparable with other tables in this sector, asset class and rating together with counterparty party default risks are described in more detail in the annual report.

Exposures by Sector, Asset Class and Rating Mandatum Life, 31 December 2019 AA+ A+ BBB+ BB+ Fixed Change - - - - income Listed Counter- from EURm AAA AA- A- BBB- C D Non-rated total equities Other party risk Total 31 Dec 2018 Basic industry 0 0 0 10 60 0 15 85 85 0 0 170 52 Capital goods 0 0 4 5 26 0 60 95 152 0 0 247 24 Consumer products 0 0 52 95 77 0 20 245 127 0 0 372 -89 Energy 0 1 0 0 0 0 47 47 0 8 0 55 5 Financial institutions 0 560 823 354 65 0 17 1,819 32 8 5 1,864 108 Governments 0 0 0 0 0 0 0 0 0 0 0 0 0 Government guaranteed 0 0 0 0 0 0 0 0 0 0 0 0 0 Health care 0 0 5 23 90 0 33 151 92 18 0 261 21 Insurance 0 0 17 51 0 0 17 85 3 8 0 96 12 Media 0 0 0 0 6 0 0 6 9 0 0 15 -12 Packaging 0 0 0 0 9 0 24 33 12 0 0 44 18 Public sector, other 0 2 25 0 0 0 0 27 0 0 0 27 -47 Real estate 0 0 1 87 5 0 144 236 0 175 0 411 89 Services 0 0 4 44 157 0 60 265 86 0 0 351 58 Technology and electronics 1 0 6 5 47 0 11 70 188 10 0 268 58 Telecommunications 0 0 8 44 72 0 0 124 15 0 0 139 -22 Transportation 0 0 0 12 0 0 1 12 29 0 0 42 8 Utilities 0 0 2 38 111 0 0 150 0 0 0 151 36 Others 0 0 0 0 16 0 2 17 0 25 0 42 -15 Asset-backed securities 0 0 0 0 0 0 0 0 0 0 0 0 0 Covered bonds 14 0 0 0 0 0 0 14 0 0 0 14 -120 Funds 0 0 0 0 0 0 187 187 478 448 0 1,112 -108 Clearing house 0 0 0 0 0 0 0 0 0 0 6 6 2 Total 15 563 946 767 741 0 637 3,669 1,308 700 11 5,688 79 Change from 31 Dec 2018 -134 -44 -164 151 262 0 73 145 -26 -41 2 79

FINANCIAL STATEMENTS 2019 150 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

The role of non-investment grade bonds is material in Nordic equity exposure includes almost only direct Alternative Investments Mandatum Life’s portfolio. A part of the money market investments to Finnish equities, and they account for The role of alternative investments has been significant securities issued by Nordic banks and cash in Nordic almost one third of equity exposure. Two thirds of equity in Mandatum Life over the years. The current allocation banks form a liquidity buffer within the fixed income investments are allocated globally consisting of both fund weight is 12 per cent. investments. At the moment, the total amount of these investments and direct investments. The breakdown investments is higher than what is needed for liquidity of Mandatum Life’s listed equity investments by The amount of private equity and alternative investments purposes. ­geographical regions is presented in the following graph. has remained at the same level as in 2018. Since the beginning of 2018, these asset classes have been managed by Sampo plc’s investment operations instead of external asset managers. The real estate portfolio is also managed by Sampo Group’s own real estate management unit. The Breakdown of Listed Equity Investments by Geographical Regions real estate portfolio includes both direct investments in Mandatum Life properties and indirect investments in real estate funds as

31 December 2019 31 December 2018 well as in shares of real estate companies and it has been total EUR 1,308 million total EUR 1,334 million quite stable. 11% 16% Market Risks of Balance Sheet 30% 13% The Board of Directors of Mandatum Life annually 34% approves the Investment Policy, which covers both the

19% 2% segregated assets and the company’s other assets that carry investment risk. This policy sets principles and limits for investment portfolio activities and they are 2% based on the features of insurance liabilities, risk taking

33% 39% capacity and shareholders’ return requirements. ● Denmark 0 ● Eastern Europe 24 ● Denmark 0 ● Eastern Europe 24 ● Norway 0 ● North America 251 ● Norway 0 ● North America 180 The Investment Policy for segregated assets defines the ● Sweden 1 ● Latin America 0 ● Sweden 1 ● Latin America 0 risk bearing capacity and the corresponding control ● Finland 387 ● Far East 215 ● Finland 459 ● Far East 151 levels for the respective portfolio. Since the future bonus ● Western Europe 430 ● Western Europe 521 reserves of the segregated group pension portfolio is the first buffer against possible investment losses, the risk bearing capacity is also based on the amount of the future

FINANCIAL STATEMENTS 2019 151 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

bonus reserve. Different control levels are based on the fixed income investments will not generate an adequate level by changing the duration of assets and by using fixed stress scenarios of assets. return compared to the applied discount rate. interest rate derivatives.

The Investment Policy for other investment assets defines In addition to investment and capitalization decisions, Currency Risk the company level risk bearing capacity, the control levels Mandatum Life has implemented active measures on the Currency risk can be divided into transaction and for the maximum acceptable risk and respective measures liability side to manage the balance sheet level interest translation risk. Mandatum Life is exposed to transaction to manage the risk. The control levels are set above the rate risk. The company has reduced the minimum risk, which refers to currency risk arising from contractual Solvency II SCR and are based on predetermined market guaranteed interest rate in new contracts, supplemented cash flows in foreign currencies. stress tests. When the above-mentioned control levels are the technical provisions with discount rate reserves and crossed, the Asset and Liability Committee reports to the adjusted policy terms and conditions as well as policy In Mandatum Life, transaction risk arises mainly from Board which then takes responsibility for the decisions administration processes to enable more efficient interest investments in other currencies than the euro as the related to the capitalization and the market risks in the rate risk management. company’s technical provisions are denominated in the balance sheet. euro. Mandatum Life does not automatically close its FX Interest Rate Risk position in foreign currencies, but instead, the currency The cash flows of Mandatum Life’s with profit technical Mandatum Life is negatively affected when rates are risk strategy is based on active management of the provisions are relatively predictable, because in most decreasing or staying at low levels, because the duration of currency position. The objective is to achieve a positive of the company’s with profit products, surrenders and liabilities is longer than the duration of assets. A growing return compared to a situation where the currency risk premiums are restricted. In addition, the company’s part of Mandatum Life’s business, i.e. unit-linked and life exposure is fully hedged. claims costs do not contain a significant inflation risk and health business, is not interest rate sensitive, which element. partially mitigates the whole company’s interest rate risk. The transaction risk positions of Mandatum Life against the euro are shown in the table Transaction Risk Position, The long-term target for investments is to provide The average duration of fixed income investments was Mandatum Life, 31 December 2019. The table shows the sufficient return to cover the guaranteed interest rate plus 2.8 years including the effect of hedging derivatives. The net transaction risk exposures and the changes in the bonuses based on the principle of fairness as well as the respective duration of the insurance liabilities was around value of positions given a 10 per cent decrease in the value shareholder’s return requirement with an acceptable level 12 years. Interest rate risk is managed at the balance sheet of the base currency. of risk. In the long run, the most significant risk is that

FINANCIAL STATEMENTS 2019 152 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Transaction Risk Position Mandatum Life, 31 December 2019

Base currency, EURm EUR USD JPY GBP SEK NOK CHF DKK Other Total, net Technical provisions 0 0 0 0 -3 0 0 0 0 -3 Investments 0 767 8 94 47 51 71 17 182 1,237 Derivatives 0 -736 -1 -94 -45 23 -76 -20 -82 -1,032 Transaction risk, net position 0 31 7 0 -1 73 -4 -3 100 203 Sensitivity: EUR -10% 0 3 1 0 0 7 0 0 10 20

Liquidity Risks However, in Mandatum Life, only a relatively small income investments was 2.9 years in Mandatum Life. The Liquidity risk is relatively immaterial for Mandatum Life part of the insurance policies can be surrendered, and table shows the financing requirements resulting from because liability cash flows in most lines of business are it is therefore possible to forecast short-term cash flows expected cash inflows and outflows arising from financial fairly stable and predictable and an adequate share of the related to claims payments with a very high accuracy. assets and liabilities as well as technical provisions. investment assets is in cash or short-term money market instruments. The maturities of technical provisions and financial Mandatum Life has a relatively low amount of financial assets and liabilities are presented in the table Cash liabilities and thus the refinancing risk is relatively small. In life insurance companies in general, a large change Flows According to Contractual Maturity, Mandatum in surrender rates could influence the liquidity position. Life, 31 December 2019. The average maturity of fixed

Cash Flows According to Contractual Maturity Mandatum Life, 31 December 2019

Carrying Carrying amount without amount with Cash flows Carrying amount contractual contractual EURm total maturity maturity 2020 2021 2022 2023 2024 2025–2034 2035- Financial assets 5,634 2,961 2,674 355 197 280 398 733 843 12 of which interest rate swaps 11 0 11 0 0 2 2 1 7 0 Financial liabilities 402 0 402 -15 -9 -10 -10 -260 -55 -191 of which interest rate swaps 9 0 9 0 0 -1 -1 -1 -3 -5 Lease liabilities 9 0 9 -2 -2 -2 -2 -2 -1 0 Net technical provisions 3,347 0 3,347 -296 -295 -273 -258 -241 -1,643 -1,302

In the table, financial assets and liabilities are divided into contracts that have an exact contractual maturity profile, and other contracts. Only the carrying amount is shown for the other contracts. In addition, the table shows expected cash flows for net technical provisions, which by their nature, are associated with a certain degree of uncertainty.

FINANCIAL STATEMENTS 2019 153 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Counterparty Default Risks Risk Considerations at Sampo counterparties is preventing accumulation of counter- In Mandatum Life, the three major sources of counter- Group Level and Sampo plc party default risks and operational risks. Hence, these party risk are financial derivatives, reinsurance, and risks are mainly managed at company level. other receivables. Counterparty default risk arising Sampo Group is first and foremost exposed to general from reinsurance or receivables from policyholders and performance of the Nordic economies. However, the In addition to the “segregation of duties at strategic level” other receivables related to commercial transactions is, Nordic economies typically are at any given time in some- principle, Sampo Group has two principles proactively however, very limited. what different stages of their economic cycles, because preventing the Group risks. The amount of intragroup of reasons such as different economic structures and exposures between the Group companies is small and the Counterparty Risk Related separate currencies. Also, geographically the Nordics as a parent company is the only source of liquidity and the to Financial Derivatives large area is more a source of underwriting ­diversification main source of capital within the Group. These principles In Mandatum Life, the default risk of derivative counter- than a concentration. Hence, inherently the Nordic area is effectively prevent the contagion risk and hence potential parties is a by-product of managing market risks. This a good basis for diversified business. problems of one company will not affect directly the other stems from the fact that Mandatum Life is a frequent user Group companies. of long-term interest rate derivatives in addition to FX To further maintain diversification of businesses Sampo forwards and options. Group proactively prevents concentrations to the extent Underwriting and market risk concentrations and their possible by segregating the duties of separate business management are described in the next sections as well as The counterparty risk of bilaterally settled derivatives areas. As a result, separate companies have very few the parent company's role as a risk manager of group-wide is mitigated by careful selection of counterparties, overlapping areas in their underwriting and investments risks and as a source of liquidity. by ­diversification of counterparties to prevent risk activities. Despite proactive strategic decisions on concentrations and by using collateral arrangements, segregation of duties, concentrations in underwriting and Underwriting Risks at Sampo Group e.g. ISDA Master Agreements backed by Credit Support investments may appear and hence liabilities and assets With respect to the underwriting businesses carried out Annexes. Since 2016, Sampo Group companies apart from are monitored at the Group level to identify potential in the subsidiary companies, it has been established that Topdanmark have settled interest rate swaps in central concentrations at a single company or risk factor level. If, Topdanmark and Mandatum Life all operate within counterparty clearing houses, which, while further the Nordic countries, but mostly in different geographical mitigating bilateral counterparty risk, also expose Sampo It is regarded that the current business model where all areas and in different lines of business and hence their Group companies to the systemic risk related to central companies have their own processes and agreements with underwriting risks are different by nature. There are some counterparty clearing houses.

FINANCIAL STATEMENTS 2019 154 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

common risk factors like the life expectancy in Finland. Market Risks at Sampo Group Level The total amount of Sampo Group’s investment assets as Also, in Denmark If and Topdanmark have some overlap- For all subsidiaries, their insurance liabilities and the at 31 December 2019 was EUR 26,820 million (25,887) as ping areas. However, there are no material underwriting company specific risk appetite are the starting points presented in the following graph. Mandatum Life’s and risk concentrations in the normal course of business. for their investment activities. The insurance liabilities Topdanmark’s investment assets presented here do not including loss absorbing buffers as well as the risk appetite include assets which cover unit-linked contracts. Consequently, business lines as such are contributing of Mandatum Life, If and Topdanmark differ, and as a result diversification benefits rather than a concentration of the structures and risks of the investment portfolios and risks. This general risk picture has not changed with balance sheets of the three companies differ respectively. increased holding in Topdanmark, because Topdanmark Sampo Group’s investment assets presented in the tables underwrites mainly Danish risks with a focus on client and graphs in this section do not include investments in the bases which only marginally overlap with If’s client bases. subsidiaries or in the associated companies (e.g. Nordea).

FINANCIAL STATEMENTS 2019 155 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Graph 21

Development of Investments If, Mandatum Life, Sampo plc and Topdanmark

31 December 2019 31 December 2018 Total EUR 26,820 million Total EUR 25,887 million EURm 14,000

12,000 11,109 11,092

10,000

8,000 7,653

6,754

6,000 5,680 5,602

4,000

2,378 2,440 2,000

0 If Mandatum Life Sampo plc Topdanmark If Mandatum Life Sampo plc Topdanmark

● Fixed income 88% 65% 60% 81% 90% 63% 70% 78% ● Listed equity 12% 23% 29% 6% 10% 24% 20% 8% ● Private equity* 0% 4% 11% 3% 0% 4% 9% 3% ● Real estate 0% 3% 0% 8% 0% 4% 0% 8% ● Other alternative investments 0% 5% 0% 2% 0% 5% 0% 3%

Sampo plc's figures do not include debt instruments issued by the insurance subsidiaries *Private Equity also includes direct holdings in non-listed equities

FINANCIAL STATEMENTS 2019 156 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Investment activities and market risk taking are portfolios and especially the role of Danish covered bonds In the next paragraphs concentrations by homogenous arranged pro-actively in such a way that there is virtually is central. In Sampo Group’s other insurance companies’ risk groups and by single names are presented first and no overlap between the wholly-owned subsidiaries’ portfolios the weight of Danish investments has been after that balance sheet level risks are discussed shortly. single-name risks except with regards to Nordic banks immaterial. where companies have their extra funds in the forms of Holdings by Sector, Geographical Area short-term money market assets and cash. From the asset A summary of Sampo Group’s market risk sensitivities is and Asset Class side’s diversification perspective Topdanmark is a positive presented in the following table. Regarding fixed income and equity exposures financial factor because the role of Danish assets is dominant in institutions and covered bonds have a material weight in the group-wide portfolios whereas the role of public sector investments is quite limited. Most of these assets are issued by Nordic corporates and institutions. Most Market Risk Sensitivities corporate issuers, although being based in the Nordic Sampo Group, 31 December 2019 countries, are operating at global markets and hence their EURm Scenario If Mandatum Life Topdanmark Sampo plc Sampo Group performance is not that dependent on the Nordic markets. -10% -128 -131 -15 -69 -342 Equities Exposures by sector, asset class and rating are presented 10% 128 131 15 69 342 in the following table. Interest -100 bps 137 103 3 42 374 rates +100 bps -132 -85 -6 -40 -341 -10% -2 -70 -46 -28 -144 Other 10% 2 70 46 28 144 Local -5% -1 11 9 52 - currency 5% 1 -11 -9 -52 - Topdanmark’s interest rate scenario figures show the net of financial assets and technical provisions. The company figures do not sum up to the Sampo Group figures due to eliminations and the exclusion of Topdanmark's technical provisions from the Sampo Group figures. The figures in this table do not completely reconcile with the table Market Risk Sensitivities, Topdanmark, 31 December 2019 and 31 December 2018 due to differences in calculation methods.

FINANCIAL STATEMENTS 2019 157 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Exposures by Sector, Asset Class and Rating Sampo Group, 31 December 2019

AA+ A+ BBB+ BB+ Fixed Change - - - - income Listed Counter- from 31 EURm AAA AA- A- BBB- C D Non-rated total equities Other party risk Total Dec 2018 Basic industry 0 0 20 97 80 0 73 270 130 0 0 400 96 Capital goods 0 0 64 46 36 0 181 327 606 0 0 933 157 Consumer products 0 0 222 370 94 0 106 791 348 0 0 1,140 -171 Energy 0 1 0 0 34 0 175 210 8 8 0 226 -135 Financial institutions 37 2,279 2,477 1,188 149 0 71 6,201 429 8 8 6,647 69 Governments 9 0 0 0 0 0 0 9 0 0 0 9 -124 Government guaranteed 9 27 0 0 0 0 0 36 0 0 0 36 0 Health care 7 0 15 50 90 0 69 232 174 18 0 423 17 Insurance 0 0 59 133 26 0 59 277 3 25 0 305 15 Media 0 0 0 0 6 0 16 22 9 0 0 30 -18 Packaging 0 0 0 0 9 0 39 48 12 0 0 60 28 Public sector, other 514 68 25 0 0 0 0 606 0 0 0 606 -183 Real estate 0 5 88 355 60 0 689 1,198 0 181 0 1,378 260 Services 0 0 4 88 226 0 93 411 362 0 0 773 90 Technology and electronics 1 0 25 18 57 0 115 217 188 10 0 415 106 Telecommunications 0 0 30 176 120 0 0 326 75 0 0 401 -44 Transportation 0 58 27 43 0 0 231 359 30 0 0 390 84 Utilities 0 0 62 152 229 0 29 472 0 0 0 472 -10 Others 0 26 0 0 16 0 29 71 0 34 0 105 7 Asset-backed securities 0 0 0 0 0 0 0 0 0 0 0 0 0 Covered bonds 2,548 70 11 0 0 0 0 2,630 0 0 0 2,630 -187 Funds 0 0 0 0 0 0 187 187 906 693 0 1,786 -24 Clearing house 0 0 0 0 0 0 0 0 0 0 16 16 -34 Total excluding Topdanmark 3,125 2,534 3,131 2,716 1,232 0 2,161 14,900 3,281 977 25 19,182 -1 Change from 31 Dec 2018 -404 -398 -185 91 364 0 257 -275 344 -29 -42 -1

Topdanmark Total Group excluding life insurance 1,670 0 142 0 0 0 150 1,963 124 108 127 2,321 Life insurance 3,221 0 239 11 9 0 381 3,862 359 870 241 5,332 Total Topdanmark 4,892 0 382 11 9 0 531 5,825 483 978 367 7,653

FINANCIAL STATEMENTS 2019 158 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Most of the financial institutions and covered bonds are Fixed Income Investments in the Financial Sector in the Nordic countries as can be seen in the table Fixed Sampo Group Excluding Topdanmark, 31 December 2019 Income Investments in the Financial Sector, Sampo Cash and Long-term Group Excluding Topdanmark, 31 December 2019. money market Long-term subordinated EURm Covered bonds securities senior debt debt Total % Finland 101 1,598 479 219 2,398 27.2 % The public-sector exposure includes government bonds, Sweden 1,703 5 551 133 2,392 27.1% government guaranteed bonds and other public-sector Norway 612 469 339 1,420 16.1% investments as shown in the table Fixed Income France 568 168 736 8.3% Denmark 167 226 233 626 7.1% Investments in the Public Sector, Sampo Group Excluding Netherlands 268 42 310 3.5% Topdanmark, 31 December 2019. The public sector has United States 217 217 2.5% had a relatively minor role in Sampo Group’s portfolios Canada 34 148 182 2.1% and these exposures have been mainly in the Nordic United Kingdom 12 2 134 17 165 1.9% Iceland 72 41 113 1.3% countries. AAA rated mortgage bonds have a material role Germany 66 0 66 0.7% in Topdanmark’s portfolios. New Zealand 37 37 0.4% Spain 28 28 0.3% Guernsey 27 27 0.3% Australia 1 26 26 0.3% Ireland 23 23 0.3% Estonia 15 7 22 0.3% Switzerland 17 17 0.2% Austria 12 12 0.1% Bermuda 10 10 0.1% Cayman Islands 2 2 0.0% Total 2,630 2,189 2,978 1,034 8,829 100.0%

Fixed Income Investments in the Public Sector Sampo Group Excluding Topdanmark, 31 December 2019

Government Public sector, EURm Governments guaranteed other Total Norway 329 329 Sweden 9 253 262 Finland 27 25 52 Denmark 9 9 Total 9 36 606 652

FINANCIAL STATEMENTS 2019 159 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

The listed equity investments of Sampo Group totaled EUR 484 million at the end of year 2019 (534). Within Nordic companies. However, these Nordic companies EUR 3,281 million at the end of year 2019 (2,937). At the Topdanmark Group, the allocation to listed equity is are mainly competing in global markets, only a few are end of year 2019, the listed equity exposure of If was EUR higher in the life company. operationally purely domestic companies. Hence, the 1,281 million (1,113). The proportion of listed equities in ultimate risk is not highly dependent on the Nordic If’s investment portfolio was 12 per cent. In Mandatum The geographical core of Sampo Group’s equity economies. A breakdown of the listed equity exposures of Life, the listed equity exposure was EUR 1,308 million at investments is in the Nordic companies. The proportion Sampo Group is shown in the graph Breakdown of Listed the end of year 2019 (1,334) and the proportion of listed of Nordic companies’ equities corresponds to 59 per Equity ­Investments by Geographical Regions, Sampo equities was 23 per cent of the investment portfolio. cent of the total equity portfolio. This is in line with Group Excluding Topdanmark, 31 December 2019 and In Topdanmark Group, the listed equity exposure was Sampo Group’s investment strategy of focusing on 31 December 2018. Graph 22

Breakdown of Listed Equity Investments by Geographical Regions Sampo Group Excluding Topdanmark

31 December 2019 31 December 2018 total EUR 3,281 million total EUR 2,937 million

11% 9% 9% 9% 1% 1% 7% 5% 9% 10% 1% 1%

26% 28% 22% 18%

15% 18% ● Denmark 284 ● Eastern Europe 24 ● Denmark 264 ● Eastern Europe 24 ● Norway 231 ● North America 334 ● Norway 147 ● North America 265 ● Sweden 932 ● Latin America 48 ● Sweden 761 ● Latin America 26 ● Finland 484 ● Far East 362 ● Finland 537 ● Far East 271 ● Western Europe 582 ● Western Europe 643

FINANCIAL STATEMENTS 2019 160 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Largest Holdings by Single Name Topdanmark, 31 December 2019. The largest single name The largest exposures by individual issuers and counter­ investments in Topdanmark’s portfolios are in AAA rated parties are presented in the table Largest Exposures Danish covered bonds. by Issuer and Asset Class, Sampo Group Exluding

Largest Exposures by Issuer and Asset Class Sampo Group Excluding Topdanmark, 31 December 2019 Long- Long- Long- Long- Long- term fixed term fixed term fixed term fixed Uncolla- % of total Cash & short- term fixed income: income: income: income: teralized investment term fixed income, Government Covered Senior Tier 1 and part of Issuer, EURm Total assets income total guaranteed bonds bonds Tier 2 Equities derivatives Nordea Bank 1,268 7% 425 839 0 459 189 191 0 4 Skandinaviska Enskilda Banken 873 5% 676 196 0 177 6 13 0 0 Danske Bank 770 4% 503 265 0 155 59 51 0 3 BNP Paribas 627 3% 568 59 0 0 59 0 0 0 Svenska Handelsbanken 543 3% 0 543 0 485 18 40 0 0 DnB 514 3% 0 514 0 194 196 125 0 0 Norway 474 3% 0 474 0 0 372 102 0 0 Swedbank 427 2% 0 427 0 277 119 31 0 0 Saxo Bank 301 2% 0 17 0 0 0 17 284 0 Landshypotek 254 1% 0 254 0 200 34 20 0 0 Total top 10 exposures 6,051 32% 2,172 3,588 0 1,948 1,049 590 284 7 Other 12,847 68% Total investment assets 18,898 100%

FINANCIAL STATEMENTS 2019 161 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

The largest high-yield and non-rated fixed income Ten Largest Direct High Yield and Non-rated Fixed Income Investments investment single-name exposures are presented in and Direct Listed Equity Investments the table Ten Largest Direct High Yield and Non-rated Sampo Group Excluding Topdanmark, 31 December 2019 Fixed Income Investments, Sampo Group Excluding % of total direct Ten largest direct high yield and non-rated fixed income Total, fixed income ­Topdanmark, 31 December 2019. Furthermore, the largest investments Rating EURm investments direct listed equity exposures are presented in the table High Street Shopping NR 154 1.1% Ten Largest Direct Listed Equity Investments, Sampo TDC B+ 99 0.7% Teollisuuden Voima BB+ 98 0.7% Group Excluding Topdanmark, 31 December 2019. Sponda NR 95 0.7% Evergood 4 ApS B+ 80 0.6% The exposures in fixed income instruments issued by Trevian Finland Properties I NR 77 0.5% non-investment grade issuers are significant, because a Saab NR 57 0.4% relatively small number of Nordic companies are rated. Pohjolan Voima NR 52 0.4% Veningen NR 51 0.4% Further, many of the rated companies have a rating lower Intrum BB 50 0.3% than investment grade rating (high yield). Total top 10 exposures 812 5.6% Other direct fixed income investments 13,622 94.4% Total direct fixed income investments 14,435 100.0%

Total, % of total direct Ten largest direct listed equity investments EURm equity investments Saxo Bank 284 11.9% Intrum 184 7.7 % Volvo 134 5.6% Nobia 122 5.1% Norwegian Finans Holding 114 4.8% Asiakastieto 92 3.9% ABB 86 3.6% Sectra 80 3.3% Veidekke 67 2.8% Telia Company 60 2.5% Total top 10 exposures 1,222 51.4% Other direct equity investments 1,156 48.6% Total direct equity investments 2,378 100.0%

FINANCIAL STATEMENTS 2019 162 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Balance Sheet Concentrations other financial assets as well. The average maturity of The capacity to generate funds is dependent on leverage In general Sampo Group is structurally dependent on subordinated loans and fixed income instruments of EUR and liquidity buffers which can be inferred from the table the performance of the Nordic economies as already 405 million was 1.8 years. Funding structure of strategic Balance Sheet Structure, Sampo plc, 31 December 2019 described earlier. Sampo Group is also economically holdings and other holdings can be considered strong. and 31 December 2018. exposed to a fall in interest rates. The lower the rates and the flatter the yield curve, the more challenging the environment is for the current business models especially when the duration of insurance liabilities is longer than Balance Sheet Structure fixed income asset duration in If and Mandatum Life. Sampo plc, 31 December 2019 and 31 December 2018 In Topdanmark interest rate risk of the balance sheet is being actively hedged and hence Topdanmark is not EURm 31 Dec 2019 31 Dec 2018 increasing interest rate risk materially at the Group level. Assets total 11,625 12,073 Liquidity 1,320 1,447 Investment assets 1,022 770 Sampo Group would benefit materially in case interest Real estate 2 2 rates would rise, because economic value of insurance Fixed income 46 23 liabilities would decrease more than value of assets Equity & private equity 973 745 backing them. At the same time the net interest income of Subordinated loans 359 489 Nordea should increase as well. Equity holdings 8,841 9,200 Subsidiaries 3,401 3,401 Associated 5,440 5,799 The Role of Sampo plc Other assets 84 167 Sampo plc is a long-term investor in Nordic financials and a source of liquidity within the Group. Hence, the healthy EURm 31 Dec 2019 31 Dec 2018 funding structure and the capacity to generate funds if Liabilities total 11,625 12,073 needed are on continuous focus. CPs issued 0 124 Long-term senior debt 3,414 3,943 Private placements 98 122 As at 31 December 2019 Sampo had long-term strategic Bonds issued 3,316 3,821 holdings of EUR 8,841 million and they were funded Subordinated debt 494 0 mainly by capital of EUR 7,596 million and senior debt Capital 7,596 7,890 of EUR 3,414 million. Average remaining maturity of Undistributable capital 98 98 Distributable capital 7,497 7,792 senior debt was 5.1 years and EUR 1,600 million of it had Other liabilities 121 115 a maturity longer than 5 years. Senior debt is used to fund

FINANCIAL STATEMENTS 2019 163 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

The leverage of Sampo plc was modest at year end loans presented in the table Balance Sheet Structure, Sampo Group Capitalization according to for example these measures: Sampo plc, 31 December 2019 and 31 December 2018 are all issued by If, Mandatum Life, Nordea and Topdanmark. Capitalization at the Group Level • The financial leverage measured as the portion of debt Apart from Nordea, they are eliminated from Group’s own The sub-group level balance of profits, risks and capital is within all liabilities was 34 (34) per cent. funds. In case these assets would be sold, in addition to the primary focus of Sampo Group. When all subsidiaries • Sampo’s net debt of EUR 2,183 (2,108) million is modest liquidity in Sampo plc, also own funds and Sampo Group are well capitalized, as a result the Group should be when compared to Sampo’s equity holdings and solvency ratio would increase. adequately capitalized as well although for example the financial assets. subordinated loans, which are eliminated from own Sampo plc balances risks within Sampo Group. When funds, decrease the solvency. In addition, changes in In regard to liquidity, the liquid funds of Sampo plc were Sampo plc is managing its funding, capital structure and the solvency capital requirements of the subsidiaries EUR 1,320 (1,447) million. Liquidity is mainly affected liquidity it takes into account that some of its operative and Nordea’s market value have an effect on the level of by received and paid dividends as well as changes in companies have other base currencies (the Swedish krona, capitalization in Sampo Group. issued debt instruments and changes in investments. the Danish krone) than the euro and that all its operative Sampo’s dividend payment takes place in April and it business areas are exposed to low interest rates. These However, at Sampo Group level there are more factors will ­significantly lower the liquidity position of Sampo. risks may affect Sampo’s decisions on the issuance of affecting capitalization than at the sub-group level. A significant portion of subordinated loans issued by the debt instruments and the composition of the liquidity These factors are illustrated in the graph Sampo Group’s Group companies (359) and a part of other investment portfolio. Capitalization Framework. assets (1,022) can be sold in case liquidity is needed. Short-term liquidity can be considered to be adequate. This is why part of Sampo plc’s debt instruments are issued in the Swedish krona and interest rate duration All in all, Sampo plc is in a good position to refinance is maintained relatively short. However, management’s its current debt and even issue more debt. This capacity market views are also affecting these decisions and for together with the tradable financial assets, means that instance at the moment the Swedish krona denominated Sampo plc is able to generate liquid funds. dividends paid by If are still in the Swedish krona, and the Swedish krona debt is converted into the euro using Currently Sampo Group has a capital buffer in excess of cross-currency swaps, due to tactical market view reasons. the Solvency Capital Requirement. The subordinated

FINANCIAL STATEMENTS 2019 164 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Sampo Group’s Capitalization Framework liquidity portfolio. In addition, investments in the Nordic financial service companies increase Sampo plc’s capital Group’s own funds requirement.

Group level Diversification benefit exists at two levels, within the buffer Other items companies and between the companies. The former is Capital requirements included in the companies’ SCRs.

Factors affecting the size of group level buffer: Conceptually, the Group’s own funds is the difference Sampo plc • Profit diversification between the market value of assets and liabilities plus • Sampo plc’s liquidity capacity the subordinated liabilities. This difference has accrued • Issuance capacity Mandatum Life during the lifetime of the Group and it includes the • Shareholders’ dividend expectations Consolidated following main components: • Business risks & arrangements Group equity / Excess of If • Balance sheet volatility assets over liabilities • Accrued profits that have not been paid as dividends over the years. Topdanmark • Market value adjustment to the book values of assets and liabilities. • Issued capital and subordinated liabilities meeting NDX and other related undertakings Solvency II requirements.

At the Group level, the capital requirement and own funds are both exposed to foreign currency translation risk. Translation risk may realize when the actual capital and the capital needs of If and Topdanmark are converted from their reporting currencies to the euro. The Group’s capital requirement is dependent mainly apart from that the parent company’s contribution to the When the reporting currencies of If and Topdanmark on the capital requirements of the business areas. Group capital need is minor most of the time, because depreciate, the actual amount of the Group’s capital in The market risk stemming from Nordea holding is a Sampo plc does not have any business activities of its own the euros decreases and the capital requirements of If and significant part of Sampo plc’s capital requirement, but other than the management of its capital structure and Topdanmark will be lower in the euro terms. Translation

FINANCIAL STATEMENTS 2019 165 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

currency risk is monitored internally and its effect on requirement. In addition to the sub-group level factors fluctuations in the market value of the equity portfolio Sampo Group’s solvency on a going concern basis is – expected profits and their volatility, business growth and the ­insurance liabilities, parent company’s capacity analyzed regularly. However, internally no capital need is prospects and ability to issue Solvency II compliant to generate liquidity, probability of business risks and set for translation risk, because it is realized only when a capital instruments – there are Group level factors that are arrangements and shareholders’ dividend expectations. sub-group is divested. also relevant when considering the size of the Group level buffer. The most material Group level factors affecting The Group level buffer is the difference between the the size of the buffer are correlation of sub-groups’ amount of the Group’s own funds and the Group capital reported profits, volatility of the balance sheet due to

FINANCIAL STATEMENTS 2019 166 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

SAMPO PLC'S FINANCIAL STATEMENTS 168 169 170 Sampo plc’s Sampo plc’s Sampo plc’s Income Statement Balance Sheet Statement of Cash Flows

FINANCIAL STATEMENTS 2019 167 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Sampo plc’s Financial Statements Income Statement

EURm Note 2019 2018 Other operating income 1 16 17

Staff expenses Salaries and remunerations -13 -9 Social security costs Pension costs -2 -2 Other 0 0

Other operating expenses 2 -57 -14

Operating profit -56 -8

Financial income and expense 4 Income from shares in Group companies 936 1,084 Income from other shares 602 588 Other interest and financial income Group companies 12 12 Other 17 27 Other investment income and expense 11 -36 Other interest income 27 25 Interest and other financial expense -79 -63 Exchange result 22 41

Proft before taxes 1,491 1,669

Income taxes -1 0

Profit for the financial year 1,490 1,669

FINANCIAL STATEMENTS 2019 168 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Sampo plc’s Balance Sheet

EURm Note 2019 2018 EURm Note 2019 2018 ASSETS LIABILITIES Intangible assets 2 0 Equity 10 Property, plant and equipment Share capital 98 98 Buildings 1 1 Fair value reserve 114 -3 Other 2 2 Invested unrestricted equity 1,527 1,527 Investments Other reserves 273 273 Shares in Group companies 3,401 3,401 Retained earnings 4,095 4,328 Receivables from Group companies 5 269 261 Profit for the financial year 1,490 1,669 Participating interests 5,440 5,799 7,596 7,890 Receivables from participating interests 90 227 Liabilities Other shares and participations 6 973 745 Long-term liabilities Other receivables 7 46 23 Bonds 3,414 3,943 Short-term receivables Subordinated debt securities 494 - Deferred tax assets 14 - 15 Other receivables 8 45 83 Short-term liabilities Prepayments and accrued income 9 35 68 Debt securities - 124 Cash and cash equivalents 1,320 1,447 Deferred tax liability 14 15 - Other liabilities 12 34 56 TOTAL ASSETS 11,625 12,073 Accruals and deferred income 13 73 59

TOTAL LIABILITIES 11,625 12,073

FINANCIAL STATEMENTS 2019 169 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Sampo plc’s Statement of Cash Flows

EURm 2019 2018 EURm 2019 2018 Operating activities Investing activities Profit before taxes 1,491 1,669 Investments in group and associated undertakings 594 417 Adjustments: Realised gains and losses on investments -1 -11 Financing activities Other adjustments -565 -639 Dividends paid -1,588 -1,444 Adjustments total -565 -649 Issue of debt securities 496 1,482 Repayments of debt securities in issue -647 -609 Change (+/-) in assets of operating activities Net cash used in financing activities -1,739 -571 Investments *) 55 -609 Other assets 49 -74 Total cash flows -127 248 Total 104 -683 Cash and cash equivalents at 1 January 1,447 1,199 Change (+/-) in liabilities of operating activities Cash and cash equivalents at 31 December 1,320 1,447 Financial liabilities 1 27 Net change in cash and cash equivalents -127 248 Other liabilities -21 28 *) Investments include both investment property and financial assets. Paid interests 4 -2 Paid taxes 5 13 Additional information to the statement of cash flows: Total -11 65 EURm 2019 2018 Interest income received 65 42 Net cash from operating activities 1,018 401 Interest expense paid -74 -50 Dividend income received 1,538 1,671

FINANCIAL STATEMENTS 2019 170 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

SAMPO PLC’S NOTES TO THE ACCOUNTS

Summary of Significant Notes to the Liabilities 10–13 Notes to the Staff and Management 17–19 Account Policies...... 172 10 Movements in the parent company's equity ...... 174 17 Staff numbers...... 176 11 Share capital...... 175 18 Board fees and management remuneration...... 176 Notes to the Income Statement 1–4 12 Other liabilities...... 175 19 Pension contributions to the CEO, 1 Other operating income...... 172 13 Accruals and deferred income...... 175 deputy CEO and the members of 177the Board...... 2 Other operating expenses...... 172 Note to the Shares Held 20 3 Auditors’ fees...... 172 Note to the Income Taxes 14 20 Shares held as of 31 Dec 2019...... 177 4 Financial income and expense...... 172 14 Deferred tax assets and liabilities...... 175 Notes to the Assets 5–9 Notes to the Liabilities and 5 Receivables from Group companies...... 173 Commitments 15–16 6 Other shares and participations...... 173 15 Pension liabilities...... 176 7 Other investment receivables...... 173 16 Future rental commitments...... 176 8 Other receivables...... 173 9 Prepayments and accrued income...... 173

FINANCIAL STATEMENTS 2019 171 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Sampo plc’s Notes to the Accounts

Summary of Significant Account Policies 3 Auditors' fees

The presentation of Sampo Plc's financial statements together with the notes has been prepared EURm 2019 2018 in accordance with the Finnish Accounting Act and Ordinance. The accounting principles Authorised Public Accountants Ernst & Young Oy applied to the separate financial statements of Sampo plc do not materially differ from those of the Group, prepared in accordance with the International Financial Reporting Standards (IFRSs). Auditing fees -0.3 -0.2 The financial assets are measured at fair value derived from the markets. Tax consultancy -0.0 -0.1 Other fees -0.1 -0.2 Total -0.4 -0.4 Notes to the Income Statement 1–4

4 Financial income and expense

1 Other operating income EURm 2019 2018 EURm 2019 2018 Dividend income 1,538 1,671 Income from investment operations 16 17 Interest income 53 53 Other 0 0 Interest expense -79 -63 Total 16 17 Gains on disposal 2 11 Exchange result 22 41 Other 11 -36 Total 1,547 1,677 2 Other operating expenses

EURm 2018 2018 Rental expenses -1 -1 IT expenses -2 -2 External services -4 -6 Other staff costs -1 -1 Loss from extra dividend -44 - Other -5 -5 Total -57 -14

Item Other includes e.g. administration fees.

FINANCIAL STATEMENTS 2019 172 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Notes to the Assets 5–9

5 Receivables from Group companies 8 Other receivables

EURm 2019 2018 EURm 2019 2018 Cost at beginning of year 261 266 Trading receivables 1 1 Additions 8 0 Derivatives 1 1 Disposals 0 -5 Other 43 82 Carrying amount at end of year 269 261 Total 45 83

Receivables are subordinated loans issued by subsidiaries. More information in the consolidated note 29 Financial liabilities. 9 Prepayments and accrued income

EURm 2019 2018 6 Other shares and participations Accrued interest 13 24 Derivatives 20 40 2019 Fair value changes 2018 Fair value changes Other 3 3 Recognised Recognised Fair Recognised in fair value Fair Recognised in fair value Total 35 68 EURm value in p/l reserve value in p/l reserve Avalaible-for-sale equity securities 973 0 -131 745 10 32

7 Other investment receivables

2019 Fair value changes 2018 Fair value changes Recognised Recognised Fair Recognised in fair value Fair Recognised in fair value EURm value in p/l reserve value in p/l reserve Bonds 46 - -16 23 0 19

FINANCIAL STATEMENTS 2019 173 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Notes to the Liabilities 10–13

10 Movements in the parent company's equity

Restricted equity Unrestricted equity Invested unrestricted EURm Share capital Fair value reserve capital Other reserves Retained earnings Total Carrying amount at 1 January 2018 98 45 1,527 273 5,772 7,714 Dividends -1,444 -1,444 Financial assets available-for-sale - recognised in equity -41 -41 - recognised in p/l -8 -8 Profit for the year 1,669 1,669 Carrying amount at 31 December 2018 98 -3 1,527 273 5,996 7,890

Restricted equity Unrestricted equity Invested unrestricted EURm Share capital Fair value reserve capital Other reserves Retained earnings Total Carrying amount at 1 January 2019 98 -3 1,527 273 5,996 7,890 Dividends -1,902 -1,902 Financial assets available-for-sale - recognised in equity 118 118 - recognised in p/l 0 0 Profit for the year 1,490 1,490 Carrying amount at 31 December 2019 98 114 1,527 273 5,584 7,596

Distributable assets

EURm 2019 2018 Parent company Profit for the year 1,490 1,669 Retained earnings 4,095 4,328 Invested unrestricted capital 1,527 1,527 Other reserves 273 269 Total 7,384 7,792

FINANCIAL STATEMENTS 2019 174 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

11 Share capital Note to the Income Taxes 14

Information on share capital is disclosed in Note 33 in the consolidated financial statements. 14 Deferred tax assets and liabilities

12 Other liabilities EURm 2019 2018 EURm 2019 2018 Deferred tax assets Derivatives 4 14 Losses 14 14 Guarantees for derivate contracts 20 41 Fair value reserve - 1 Other 10 1 Total 34 56 Deferred tax liabilities Fair value reserve -28 -

Total, net -15 15 13 Accruals and deferred income

EURm 2019 2018 Deferred interest 31 26 Derivatives 29 22 Other 13 11 Total 73 59

FINANCIAL STATEMENTS 2019 175 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Notes to the Liabilities and Commitments 15–16 18 Board fees and management remuneration

EURk 2019 2018 Managing Director Kari Stadigh 3,891 4,143 15 Pension liabilities Members of the Board The basic and suplementary pension insurance of Sampo plc's staff is handled through of Directors insurances in Varma Mutual Insurance Company and in Mandatum Life Insurance Company Björn Wahlroos 175 175 Limited. Fiona Clutterbuck 96 - Christian Clausen 96 96 16 Future rental commitments Jannica Fagerholm 140 115 Adine Grate Axén - 96 Johanna Lamminen 96 - EURm 2019 2018 Veli-Matti Mattila 90 90 Not more than one year 1 1 Risto Murto 90 90 Over one year but not more Antti Mäkinen 90 96 than five years 4 4 Eira Palin-Lehtinen - 115 Over five years - 0 Total 5 5 In accordance with the decision of the Annual General Meeting in 2019, the company has compensated the transfer tax related to the acquisition of the company shares, in total EUR 11,220.32 (EUR 1,116.82 pertaining to the Vice Chairman and EUR 10,130.50 pertaining to the other Finnish members of the Board). Notes to the Staff and Management 17–19 Pension liability

The Group CEO is entitled to a defined contribution pension in accordance with the pension 17 Staff numbers contract in force. The annual pension premium is fixed at EUR 400,000.

2019 2018 Average Average during during EURm the year the year Full-time staff 63 62 Part-time staff 1 2 Temporary staff 1 1 Total 65 65

FINANCIAL STATEMENTS 2019 176 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

19 Pension contributions to the CEO, Note to the Shares Held 20 deputy CEO and the members of the Board

Supplementary Statutory 20 Shares held as of 31 Dec 2019 EURk pension costs pension costs Total Pension contributions paid Percentage of during the year share capital Carrying amount Company name held EURm

President/CEO1) 400 196 596 Group undertakings Former Chairmen of the Board Kalevi Keinänen2) 22 - 22 P&C insurance Former Presidents/CEO:s If Skadeförsäkring Holding AB, Stockholm Sweden 100.00 1,886 Harri Hollmen2) 53 - 53 475 196 671 P&C and life insurance Topdanmark A/S, Copenhague Denmark 46.66 1,031 1) The Group CEO is entitled to a supplementary defined contribution pension in accordance with the present pension contract. The annual pension premium is fixed at EUR 400,000. 2) Group pension agreement with a retirement age of 60 years and a pension benefit of 66 per cent of Life insurance the pensionable TyEL-salary (TyEL: Employee's Pension Act). The payment for 2019 is based on a TyEL Mandatum Life Ltd, Helsinki Finland 100.00 484 index adjustment.

Other Sampo Capital Oy, Helsinki Finland 100.00 1

FINANCIAL STATEMENTS 2019 177 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts

Approval of the Financial Statements and the Board of Directors’ Report

Helsinki, 6 February 2020

Sampo plc

Board of Directors

Christian Clausen Fiona Clutterbuck Jannica Fagerholm

Johanna Lamminen Veli-Matti Mattila Risto Murto

Antti Mäkinen

Björn Wahlroos Torbjörn Magnusson Chairman Group CEO

FINANCIAL STATEMENTS 2019 178 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts REPORT

Auditor’s Report (Translation of the Finnish original)

To the Annual General Meeting of Sampo plc

Report on the Audit of Basis for Opinion Key Audit Matters Financial Statements We conducted our audit in accordance with good auditing Key audit matters are those matters that, in our Opinion practice in Finland. Our responsibilities under good ­professional judgment, were of most significance in our auditing practice are further described in the Auditor’s audit of the financial statements of the current period. We have audited the financial statements of Sampo plc (busi- Responsibilities for the Audit of Financial Statements section These matters were addressed in the context of our audit ness identity code 0142213-3) for the year ended 31 December of our report. of the financial statements as a whole, and in forming our 2019. The financial statements comprise the consolidated opinion thereon, and we do not provide a separate opinion balance sheet, income statement, statement of comprehen- We are independent of the parent company and of on these matters. sive income, statement of changes in equity, statement of the group companies in accordance with the ethical cash flows and notes, including a summary of significant ­requirements that are applicable in Finland and are rele- We have fulfilled the responsibilities described in the accounting policies, as well as the parent company’s balance vant to our audit, and we have fulfilled our other ethical Auditor’s responsibilities for the audit of the financial sheet, income statement, statement of cash flows and notes responsibilities in accordance with these requirements. statements section of our report, including in relation to these matters. Accordingly, our audit included the In our opinion In our best knowledge and understanding, the non-audit performance of procedures designed to respond to our • the consolidated financial statements give a true and services that we have provided to the parent company assessment of the risks of material misstatement of the fair view of the group’s financial position as well as its and group companies are in compliance with laws financial statements. The results of our audit procedures, financial performance and its cash flows in accordance and ­regulations applicable in Finland regarding these including the procedures performed to address the matters with International Financial Reporting Standards (IFRS) ­services, and we have not provided any prohibited below, provide the basis for our audit opinion on the as adopted by the EU. non-audit services referred to in Article 5(1) of accompanying financial statements. • the financial statements give a true and fair view of the regulation (EU) 537/2014. The non-audit services that parent company’s financial performance and financial we have ­provided have been disclosed in note 36 to the We have also addressed the risk of management override of position in accordance with the laws and regulations ­consolidated financial statements and note 3 to the parent internal controls. This includes consideration of whether governing the preparation of financial statements in company financial statements. there was evidence of management bias that represented a Finland and comply with statutory requirements. risk of material misstatement due to fraud. We believe that the audit evidence we have obtained Our opinion is consistent with the additional report is sufficient and appropriate to provide a basis for our submitted to the Audit Committee. opinion.

FINANCIAL STATEMENTS 2019 179 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts REPORT

Key Audit Matter How our audit addressed the Key Audit Matter

Valuation of insurance contract liabilities We refer to the Summary of significant accounting policies, Accounting policies regarding management judgment and key sources of estimation uncertainties and Notes 26 and 27.

At 31 December 2019 the Group has insurance contract liabilities representing amounting Our audit procedures included evaluation of the governance around the overall Group to mEUR 32,409 (31 December 2018: mEUR 29,805) which represents 82% of the Group’s reserving process and included testing the operating effectiveness of key controls over total liabilities and it is thus the single largest liability of the Group. The insurance the identification, measurement and management of the Group’s calculation of insurance contract liabilities comprise life and non-life insurance contract liabilities. liabilities.

The life insurance contract liabilities are based on estimate of future claims payments. We evaluated the appropriateness of methodologies and assumptions used, and The estimate is based on assumptions which include uncertainty. Changes in assumptions ­independently re-projected the reserve balances for certain classes of business. can result in material impacts to the valuation of the liabilities. Key assumption areas include interest rate and life expectancy of policy holders. We involved our internal actuarial specialists to assist us in assessing the appropriateness of assumptions used. The estimation of non-life insurance contract liabilities involves significant assumptions to be made in provisions for claims outstanding. Key assumption areas include inflation We assessed the adequacy of disclosures relating to insurance contracts liabilities. rate and life expectancy of beneficiaries. The liabilities are based on a best estimate of ultimate cost of all claims incurred but not settled, whether reported or not, together with claims handling costs.

FINANCIAL STATEMENTS 2019 180 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts REPORT

Key Audit Matter How our audit addressed the Key Audit Matter

Valuation of financial assets We refer to the Summary of significant accounting policies, Accounting policies regarding management judgment and key sources of estimation uncertainties and Notes 9 and 14-20.

The Group’s investment portfolio excluding investments in associates represents amounts Our audit procedures included testing the effectiveness of controls in place over recording to mEUR 36,418 (2018: mEUR 33,363 which represents 70% of the Group’s total assets. Fair fair values of assets using unobservable input. value measurement can be subjective, specifically in areas where fair value is based on a model-based valuation. Valuation techniques for private equity funds, non-listed bonds We performed additional procedures for areas of higher risk and estimation, involving our and non-listed equities involve setting various assumptions regarding pricing factors. The valuation specialists. use of different valuation techniques and assumptions could lead to different estimates of fair value. Specific areas of audit focus include the valuation of level 2 and 3 assets In respect of the investments in private equity funds, we evaluated and tested the according to IFRS where valuation techniques use unobservable inputs. The investment procedures of the Group to determine the fair value of these investments. The procedures portfolio includes level 2 assets amounting to mEUR 7,458 and level 3 assets amounting to include assessment of fund net asset value based on the fair value of underlying mEUR 2,708 (refer to note 17). ­investment, independent broker valuations and evidence of underlying financial data.

This matter is a significant risk of material misstatement referred to in EU Regulation No We assessed the adequacy of disclosures relating to the financial assets. 537/241, point (c) of Article 10(2).

FINANCIAL STATEMENTS 2019 181 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts REPORT

Key Audit Matter How our audit addressed the Key Audit Matter

Associated company Nordea We refer to the Summary of significant accounting policies and note 13.

The value of the Nordea shares in the consolidated balance sheet amounts to mEUR 6,712 Our audit procedures included testing the effectiveness of controls in place over (31 December 2018: mEUR 7,535). The Group’s ownership in Nordea Bank Abp is 19.87%. ­recognizing the Group’s share of Nordea’s financial information. Nordea Bank Abp is an associated company of the Group and is accounted for based on equity accounting. The holding in Nordea Bank Abp represents 13% of the Group’s total Our audit procedures included, among others, involving our valuation specialists to assist assets. us in evaluating the assumptions and methodologies used by the Group in preparing the impairment test. The book value of the Nordea holding exceeded the market value of the Group’s ownership at the reporting date, due to which an impairment test has been prepared at We assessed the adequacy of disclosures relating to associated companies. 31 December 2019.

Responsibilities of the Board of they determine is necessary to enable the preparation Auditor’s Responsibilities for the Directors and the Managing Director of financial statements that are free from material Audit of Financial Statements for the Financial Statements ­misstatement, whether due to fraud or error. Our objectives are to obtain reasonable assurance on The Board of Directors and the Managing Director are In preparing the financial statements, the Board of whether the financial statements as a whole are free from responsible for the preparation of consolidated financial Directors and the Managing Director are responsible for material misstatement, whether due to fraud or error, statements that give a true and fair view in accordance assessing the parent company’s and the group’s ability and to issue an auditor’s report that includes our opinion. with International Financial Reporting Standards (IFRS) to continue as going concern, disclosing, as applicable, Reasonable assurance is a high level of assurance, but is as adopted by the EU, and of financial statements that matters relating to going concern and using the going not a guarantee that an audit conducted in accordance give a true and fair view in accordance with the laws concern basis of accounting. The financial statements with good auditing practice will always detect a material and regulations governing the preparation of financial are prepared using the going concern basis of accounting misstatement when it exists. Misstatements can arise statements in Finland and comply with statutory unless there is an intention to liquidate the parent from fraud or error and are considered material if, requirements. The Board of Directors and the Managing company or the group or cease operations, or there is no individually or in aggregate, they could reasonably be Director are also responsible for such internal control as realistic alternative but to do so.

FINANCIAL STATEMENTS 2019 182 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts REPORT

expected to influence the economic decisions of users • Conclude on the appropriateness of the Board of We communicate with those charged with governance taken on the basis of the financial statements. Directors’ and the Managing Director’s use of the going regarding, among other matters, the planned scope and concern basis of accounting and based on the audit evi- timing of the audit and significant audit findings, including As part of an audit in accordance with good auditing dence obtained, whether a material uncertainty exists any significant deficiencies in internal control that we practice, we exercise professional judgment and maintain related to events or conditions that may cast significant identify during our audit. professional skepticism throughout the audit. We also: doubt on the parent company’s or the group’s ability to continue as a going concern. If we conclude that a We also provide those charged with governance with a • Identify and assess the risks of material misstatement of material uncertainty exists, we are required to draw statement that we have complied with relevant ethical the financial statements, whether due to fraud or error, attention in our auditor’s report to the related disclo- requirements regarding independence, and communicate design and perform audit procedures responsive to sures in the financial statements or, if such disclosures with them all relationships and other matters that may those risks, and obtain audit evidence that is sufficient are inadequate, to modify our opinion. Our conclusions reasonably be thought to bear on our independence, and and appropriate to provide a basis for our opinion. The are based on the audit evidence obtained up to the where applicable, related safeguards. risk of not detecting a material misstatement resulting date of our auditor’s report. However, future events or from fraud is higher than for one resulting from error, conditions may cause the parent company or the group From the matters communicated with those charged with as fraud may involve collusion, forgery, intentional to cease to continue as a going concern. governance, we determine those matters that were of most omissions, misrepresentations, or the override of • Evaluate the overall presentation, structure and content significance in the audit of the financial statements of the internal control. of the financial statements, including the disclosures, current period and are therefore the key audit matters. We • Obtain an understanding of internal control relevant and whether the financial statements represent the describe these matters in our auditor’s report unless law or to the audit in order to design audit procedures that underlying transactions and events so that the financial regulation precludes public disclosure about the matter or are appropriate in the circumstances, but not for the statements give a true and fair view. when, in extremely rare circumstances, we determine that a purpose of expressing an opinion on the effectiveness of • Obtain sufficient appropriate audit evidence regarding matter should not be communicated in our report because the parent company’s or the group’s internal control. the financial information of the entities or business the adverse consequences of doing so would reasonably be • Evaluate the appropriateness of accounting policies activities within the group to express an opinion on the expected to outweigh the public interest benefits of such used and the reasonableness of accounting estimates consolidated financial statements. We are responsible for communication. and related disclosures made by management. the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

FINANCIAL STATEMENTS 2019 183 GROUP’S IFRS FINANCIAL STATEMENTS SAMPO PLC’S FINANCIAL STATEMENTS BOARD OF AUDITOR’S DIRECTORS’ REPORT Group’s Notes to the Accounts Sampo plc’s Notes to the Accounts REPORT

Other Reporting Our opinion on the financial statements does not cover Opinions based on the assignment Requirements the other information. of the Audit Committee

In connection with our audit of the financial statements, We support that the financial statements should be Information on our our responsibility is to read the other information adopted. The proposal by the Board of Directors regarding audit engagement identified above and, in doing so, consider whether the the use of the profit shown in the balance sheet is in other information is materially inconsistent with the compliance with the Limited Liability Companies Act. We were first appointed as auditors by the Annual financial statements or our knowledge obtained in the We support that the members of the Board of Directors of General Meeting on 10 April 2002, and our appointment audit, or otherwise appears to be materially misstated. the parent company and the Managing Director should be represents a total period of uninterrupted engagement of With respect to report of the Board of Directors, our discharged from liability for the financial period audited 18 years. responsibility also includes considering whether the by us. report of the Board of Directors has been prepared in accordance with the applicable laws and regulations. Helsinki 2 March 2020 Other information In our opinion, the information in the report of the Ernst & Young Oy The Board of Directors and the Managing Director are Board of Directors is consistent with the information Authorized Public Accountant Firm responsible for the other information. The other information in the financial statements and the report of the Board comprises the report of the Board of Directors with referred of Directors has been prepared in accordance with the Kristina Sandin statements and the Corporate Governance Statement, applicable laws and regulations. Authorized Public Accountant Remuneration report and the Group CEO’s review, but does not include the financial statements and our auditor’s If, based on the work we have performed on the other report thereon. We have obtained the report of the Board of information that we obtained prior to the date of this Directors prior to the date of this auditor’s report, and the auditor’s report, we conclude that there is a material other reports and statements mentioned above are expected misstatement of this other information, we are required to to be made available to us after that date. report that fact. We have nothing to report in this regard.

FINANCIAL STATEMENTS 2019 184 Sampo plc Fabianinkatu 27 00100 Helsinki, Finland

2019 Phone: +358 10 516 0100 Business ID: 0142213-3

www.sampo.com @Sampo_plc @sampo_oyj sampo-plc